REFILE-FOREX-Dollar hits two-week high vs yen after U.S. jobs data

Wed Oct 3, 2012 9:26am EDT

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* ADP report showed U.S. added 162,000 private sector jobs
    * Euro expected to hold above $1.28
    * Investors unceratin about Spanish bailout

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 3 (Reuters) - The dollar climbed to a two-week
high against the yen on Wednesday after data showed U.S private
sector jobs increased by more than expected last month, fueling
optimism that the world's largest economy may be on a more
stable path to recovery.  
    U.S. private sector employers added 162,000 jobs in
September, exceeding consensus forecasts. August's private
payrolls, however, were revised lower to 189,000 from the
previously reported 201,000 jobs..
    "Overall, the number is consistent with a slowly improving
job market," said Omer Esiner, chief market analyst, at
Commonwealth Foreign Exchange in Washington.
    Few analysts though would stake their bets on an ADP report
many feel is not an accurate reflection of the U.S. labor
market. 
    The dollar rose as high 78.47 yen after the data, its
highest since Sept. 20. It was last at 78.40 yen, up 0.4 percent
on the day.
    Citing bankers, Jamie Coleman, currency strategist, at
Forexlive.com in Boston noted an uptick in speculative demand
for dollar/yen on an improving technical backdrop.
    "Jawboning from the new finance minister and threats of
foreign bond buying by the Japanese authorities are helping
improve sentiment toward the greenback," Coleman said.
    The euro, meanwhile, fell against the dollar, as investors
grew uncertain about the prospects of Spain seeking a bailout, a
move which would prompt the European Central Bank to buy Spanish
bonds and boost the common currency.
    Prime Minister Mariano Rajoy on Tuesday quashed speculation
the country could apply for a bailout as soon as this weekend.
 
    Most market participants though were convinced that Spain
will eventually request aid.
    The single currency fell 0.1 percent to $1.2898,
still well above the three-week low of $1.28035 hit on Monday
and with the potential to test Tuesday's peak of $1.2968.
    "We expect Spain to apply for aid and relatively soon,
within the next one to three weeks ... This will be a further
relief for the euro but it's still not solving the underlying
problems of the euro zone," said Richard Falkenhall, currency
strategist at SEB in Stockholm.
    "It's reasonable to see people cutting back on short euro
positions, but it's hard to believe that medium to long-term
investors would be setting long euro positions."
    He said a Spanish bailout request would push the euro above
$1.30, perhaps towards $1.35 but not further.
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