FOREX-Dollar rallies across the board, cheered by US jobs data

Fri Mar 8, 2013 4:33pm EST

* Dollar/yen hits highest level since August 2009
    * Euro falls to three-month low against the dollar
    * U.S. jobs data well above expectations


    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 8 (Reuters) - The dollar surged to its
highest in more than three years against the yen and a
three-month peak versus the euro on Friday, bolstered by a
report showing the U.S. economy created more jobs than expected
last month, pushing the unemployment rate to a four-year low.
    The greenback also posted its best weekly performance
against the yen in two months. It also gained versus the euro
for a fifth straight week.
    The jobs report, suggesting the economy has developed enough
momentum to withstand the blow from higher taxes and deep
government spending cuts, fuelled speculation that the U.S.
Federal Reserve will tone down its ultra-loose monetary policy
sooner than anticipated. 
    Data showed that non-farm payrolls surged in February, with
employers adding 236,000 jobs, handily beating economists'
expectations for a gain of 160,000. The jobless rate fell in
February to 7.7 percent, the lowest since December 2008, from
7.9 percent in January. 
    "Chants of 'USA! USA!' echoed on the trading floor (after) a
very strong employment report was published this morning," said
Sean Cotton, vice president and foreign exchange advisor at Bank
of the West in San Ramon, California.
    "The data fits the story of an economy that has weathered
the early stages of the fiscal drag extremely well."
    The euro fell against the dollar, erasing gains from
Thursday when European Central Bank President Mario Draghi gave
less dovish policy signals than expected. It dropped as low as
$1.2955, its weakest level since Dec. 11 and was last down 0.8
percent at $1.2999.   
    Nearly US$3.0 billion in euros changed hands on Friday,
using Reuters Dealing 
    On the back of better-than-expected U.S. non-farm payroll
figures, Rabobank has revised lower its three-month forecast for
euro/dollar to $1.28 from $1.30. Over the next few weeks, the
bank said the euro is likely to maintain a "jittery range"
around the $1.29-$1.32 level.
    Against the yen, the dollar climbed as high as 96.54 yen
, its strongest level since August 2009. It was last at
96.11, up 1.4 percent, the dollar's best daily performance in
almost a month. 
    Around $3.8 billion in yen were traded on the Reuters
Dealing platform.
    The yen seems likely to remain under pressure as investors,
looking past the Bank of Japan's decision to hold policy steady
on Thursday at its April meeting, expect new officials to take
aggressive action to beat deflation. 
    If the BoJ expands its stimulus program next month, that
could open the way for a test of 100 yen, said Ronald Ip,
director of wealth solutions group for HSBC Global Markets, in
London.
    BNY Mellon capital flows data showed that the U.S. dollar
has been steadily net bought for four consecutive sessions, with
U.S. stocks also largely in demand. Most of the U.S. stock
purchases came from foreign investors, which is another source
of support for the dollar, the bank said.
    "The summation of our investor activity in recent weeks
suggests market participants have been increasingly favoring the
dollar, which is no longer out of favor during risk-on investor
sentiment, while still retaining its safe-haven allure during
bouts of risk aversion," said Samarjit Shankar, director of
market strategy at BNY Mellon in Boston.
    
    EURO STEADIES
    The euro rose 0.5 percent against the yen to 124.92 yen
, with the session peak at 125.95 yen, the highest
since Feb. 13.
    Investors' expectations of future rate cuts in the euro
zone, however, remained a focal point, reinforced by comments
from International Monetary Fund head Christine Lagarde, who
said the ECB should lower rates. 
    Jane Foley, senior currency strategist at Rabobank in
London, acknowledged the downside risks currently lurking in the
euro zone.
    "The results of the Italian elections has so far failed to
cause significant disruption in peripheral bond markets but the
impact has the potential to breed uncertainties for weeks and
even months," Foley said.
    In addition, Morgan Stanley analysts said in a note to
clients that the downward revision of euro-zone growth forecasts
and the below-target inflation forecast continued to provide the
ECB with flexibility for future cuts in interest rates.
    They said any rebound in the euro against the dollar was an
opportunity to sell for an eventual decline toward $1.27/1.28.
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