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

Fri May 3, 2013 4:50pm EDT

Related Topics

* 165,000 new jobs in April, jobless rate at 4-year low
    * Dollar posts biggest one-day rise in two weeks vs yen
    * Euro finds support at $1.3050 area, remains vulnerable

    By Wanfeng Zhou and Daniel Bases
    NEW YORK, May 3 (Reuters) - The dollar surged more than 1
percent against the yen on Friday to its highest level in a week
after surprisingly strong U.S. April jobs data fueled optimism
about the resiliency of the U.S. economy. 
    U.S. nonfarm payrolls rose by 165,000 in April, and job
increases for the previous months were revised higher. The
unemployment rate fell to a four-year low of 7.5 percent. The
numbers topped economists' expectations. 
    "With the yen, the story is everybody is expecting outflows
given their stimulus plan," Alvise Marino, currency strategist
at Credit Suisse in New York, said. "The fact that you are
seeing good growth abroad, it improves the likelihood that money
moves out and there is an attraction of that Japanese cash
outflow." 
    The dollar rose 1.13 percent to 99.06 yen, 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 the 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 level in nine months, while U.S.
factory orders fell sharply in March.
    The Federal Reserve said on Wednesday after its policy
meeting that it will continue buying $85 billion in bonds each
month to keep interest rates low and spur growth. The Fed said
it would step up purchases if needed to protect the economy.
 
    U.S. stocks advanced on the jobs report. The benchmark S&P
500 stock index closed up 1.04 percent to 1,614.22. 
    
    EURO VULNERABLE
    The euro rose 0.40 percent to $1.3115, 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 the European Central Bank's president, Mario Draghi, said
Thursday that 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 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 policy-making
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 1.54 percent to 129.90 yen
, 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 82.10,
down 0.43 percent on the day.
    For the week, the euro rose 0.66 percent against the
greenback. Against the yen, the U.S. dollar climbed 1 percent.
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