FOREX-Dollar jumps 1 percent vs yen after U.S. jobs data

Fri May 3, 2013 12:21pm EDT

Related Topics

* Nonfarm payrolls rose 165,000 in April, jobless rate at
4-year low
    * Dollar on pace for biggest one-day rise in two weeks vs
yen
    * Euro finds support at $1.3050 area, remains vulnerable

    By Wanfeng Zhou
    NEW YORK, May 3 (Reuters) - The dollar surged more than 1
percent against the yen on Friday after surprisingly strong U.S.
April jobs data fueled optimism the U.S. economy may be more
resilient than some had feared.
    U.S. employment rose more than expected in April, with
nonfarm payrolls rising 165,000, while job increases for the
previous months were revised higher. The unemployment rate fell
to a four-year low of 7.5 percent. 
    The dollar had come under pressure lately after
disappointing economic news prompted investors to pare back
expectations the Federal Reserve may taper its bond purchases,
known as quantitative easing, any time soon.
    "No spring swoon," said Alan Ruskin, head of G10 FX strategy
at Deutsche Bank in New York. "The data in one swoop puts a
reduction of Fed QE purchases firmly back on the table for the
second half of this year.
    "The data is very solidly U.S. dollar-positive, but probably
not enough to prompt an immediate assault" on the 100 yen level
for dollar/yen, he said.
    The dollar rose 1.1 percent to 99.03 yen, on pace for
its biggest one-day rise in two weeks, after hitting a session
peak of 99.26 yen, according to Reuters data. The dollar hit a
four-year high of 99.94 yen on April 11, but its rally stalled
ahead of resistance and option barriers around 100 yen.
    Dean Popplewell, chief currency strategist at OANDA in
Toronto, said more positive U.S. data in the coming weeks could
push the dollar to breach the 100 yen level.
    "After a month of struggling to break the psychological 100
yen barrier, the bears must now feel more confident after
Friday's nonfarm payrolls print that another positive U.S. data
print over the next two weeks could finally prove to be the
catalyst that allows the market to punch through this imaginary
barrier," he said.
    The dollar's rally lost some momentum after separate data
showed the pace of growth in the vast U.S. services sector
slowed in April to its weakest in nine months, while U.S.
factory orders fell sharply in March.
    The Fed said on Wednesday after its policy meeting it will
continue buying $85 billion in bonds each month to keep interest
rates low and spur growth, and would step up purchases if needed
to protect the economy. 
    
    EURO VULNERABLE
    The euro rose 0.4 percent to $1.3110, rebounding
after finding support in the $1.3050 area. It had hit a session
low of $1.3033 in the wake of the U.S. jobs data. Traders said
the euro failed to move further below $1.3050, leading to an
intraday rebound.
    Sentiment on the euro remained negative, analysts said,
after European Central Bank President Mario Draghi said Thursday
the bank was technically ready for negative deposit rates and
noted downside risks to the economy.
    A negative deposit rate would penalize banks for hoarding
cash and could drive money out of the euro zone.
    "Putting the deposit rate into negative territory comes at a
significant cost, undermining especially money market fund flows
into weaker peripheral banks," Morgan Stanley said in note.
    "Bearing these costs in mind and (ECI chief Mario) Draghi
showing his readiness to use the negative deposit rate anyway is
one of the clearest indications that the ECB wants a weak
exchange rate."
    ECB policymakers on Friday played down prospects of the bank
cutting its deposit rate below zero any time soon, saying it was
just one of several possible treatments for the sickly euro zone
economy. 
    Ewald Nowotny, a member of the central bank's policymaking
Governing Council, said the possibility of negative deposit
rates was part of "open-minded" ECB policy discussions but "not
something that will lead to a short-term result."
    Against the yen, the euro rallied 1.6 percent to 129.99 yen
, on track for its best one-day gain since April 16.
    The dollar's losses against the euro helped drag it lower on
an index basis, with the dollar index last trading at 82.096,
down 0.2 percent on the day.
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