FOREX-Dollar slips vs most majors in wake of Friday jobs report

Mon Sep 9, 2013 11:55am EDT

* Dollar weak against key currencies, other than the yen

* Euro zone sentiment data helps euro

* Australian dollar near 3-week high, aided by Chinese data

NEW YORK, Sept 9 (Reuters) - The dollar slipped against most major currencies on Monday amid continued debate over how soon the U.S. Federal Reserve will begin to taper its stimulus program following a disappointing U.S. jobs report last week.

The yen fell on Monday, losing ground as Japanese stocks rallied following Tokyo's winning bid to host the 2020 Olympics and as second-quarter economic growth was revised up sharply, while the euro was lifted by better-than-expected euro zone sentiment data.

But data Friday showing slower-than-expected U.S. job growth in August, even as the jobless rate hit a 4-1/2 year low, continued to weigh on sentiment although the dollar did not undergo the mauling it took on Friday.

"We're still re-evaluating the nonfarm payrolls release on Friday," said Michael Woolfolk, global market strategist at BNY Mellon in New York. "But the market does appear to be taking this more in stride today and sentiment is the Fed will taper in September despite the sour report."

The euro rose 0.6 percent against the dollar and the dollar gained 0.4 percent against the yen. The euro was at a more than one week high against the dollar at the peak.

The dollar index, the dollar against a basket of six currencies, was down 0.4 percent on Monday, extending Friday's 0.6 percent drop.

Expectations the Fed would announce that it will begin to pare back its massive monthly bond purchases at its Sept. 17-18 policy meeting have buoyed the dollar lately and are largely responsible for the 2.8 percent gain in the dollar index this year. A reduction in stimulus will lift U.S. Treasury yields and bolster the appeal of dollar-denominated assets.

Comments by two Federal Reserve officials suggested stimulus unwinding was still on track.

While the euro was supported by the positive Sentix sentiment data, investors were keeping a wary eye on Rome, where the Italian Senate is set to begin a debate on whether to expel former premier, Silvio Berlusconi, from parliament. If he is ousted, the move could threaten the country's ruling coalition.

A looming German general election was also keeping the euro in check.

"Volatility surrounding euro should pick up this week, as we approach the German elections and Italian politics grab market attention," Morgan Stanley said in a note. "Higher volatility and a central bank that stands ready to push back against higher rates should weaken euro, in our view."

OLYMPICS

The dollar's gains were pronounced against the yen. The Olympics win for Tokyo could translate into a big boost for the Japanese economy and a shot in the arm for Prime Minister Shinzo Abe, who is attempting to reflate the economy after decades of sub-par growth and deflation.

The Tokyo bid committee estimated that hosting the Olympics would boost the economy by 3 trillion yen ($30 billion) over the next seven years..

This boosted the Nikkei, which jumped to a five-week high, and as the yen has an inverse correlation with Tokyo shares, the currency slipped. The yen is a safe-haven currency and tends to move in the opposite direction to riskier assets like stocks. Japanese stocks were also helped by a sharp upward revision of second-quarter growth data.

All of which led some speculators and traders to sell the yen. The dollar hit a high of 100.10 yen earlier on Monday. The euro rose 1 percent to 131.90 yen.

Both the dollar and the euro have gained more than 14 percent this year against the yen as the Bank of Japan embarked on a massive monetary stimulus program in April.

But the yen's weakness could be temporary with investors wary of a possible U.S.-led military strike against Syria that could lead to fresh safe-haven inflows.

Meanwhile, the Australian dollar hit a three-week high at $0.9224, benefiting from Chinese trade data. China is Australia's biggest export market.

The Aussie last stood at $0.9204, up 0.2 percent. It barely reacted to Saturday's national election result despite new Prime Minister Tony Abbott's election pledges to revitalize the mining industry.

"The core issue remains," said Christopher Vecchio, currency analyst at DailyFX in New York. "Weak revenue streams as demand for base metals erodes - Australia's top export being iron ore."

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