FOREX-Dollar gains as soft U.S. jobs data dismissed due to weather

Wed Mar 5, 2014 9:54am EST

Related Topics

* Yen extends broad slide, focus shifts to data
    * Euro lower against the dollar ahead of ECB meeting
    * Overnight euro/dollar implied volatility rises
    * ADP report shows U.S. jobs gain of 139,000


    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 5 (Reuters) - The dollar rallied on
Wednesday, shrugging off a softer-than-expected U.S.
private-sector payrolls report for February that may have been
affected by severe winter conditions.
    U.S. private employers added 139,000 jobs in February, lower
than market expectations, and gains the previous month were
revised downward, a report by a payrolls processor showed.
Economists surveyed by Reuters had forecast the ADP National
Employment Report would show a gain of 160,000 jobs.
 
    The dollar did tick lower in a knee-jerk reaction to the ADP
data, but then moved back to where it was before the release of
the report.
    "The ADP is not a good predictor of the nonfarm payrolls
report and the numbers were murky anyway because of the weather
distortions," said Mark McCormick, currency strategist at Credit
Agricole in New York. 
    "We probably have to wait until the March data comes in to
get a good sense of how the underlying economy has actually
performed."
    Investors were also focused on the European Central Bank's
monetary policy meeting on Thursday, which analysts expect will
result in some form of policy easing to ward off deflationary
risks in the euro zone. That expectation has led to weakness in
the euro against the dollar.
    The dollar's gains were also helped by losses in the yen,
which fell for a second straight day as concerns over a
Russia-Ukraine standoff eased. 
    Markets, however, are keeping an eye on the region after
Russia test-fired an intercontinental ballistic missile from a
base not far from eastern Ukraine to a range in Kazakhstan.
  
    At midmorning, the euro was down 0.2 percent versus the
dollar at $1.3721, pulling back from Friday's two-month
high of $1.3824.
    Despite better-than-expected retail sales data for January
and a survey that showed euro zone private-sector business
growing at its fastest pace in more than 2-1/2 months in
February, investors sold the euro, given the risk that the ECB
could loosen policy on Thursday.
    Inflation is running well below the ECB's target of just
under 2 percent, and the central bank is under pressure to pull
it out of a "danger zone" that threatens to stall the region's
fragile recovery. 
    "I do not think the market has priced in the risk of ECB
action fully," said Jeremy Stretch, a currency strategist at
CIBC World Markets in London.
    Indeed, overnight euro/dollar implied volatility,
a gauge of how sharp currency swings will be, jumped to 11.50
percent from around 5 percent at the start of the week.
    The euro was higher against the yen at 140.65 yen 
after gaining 0.8 percent on Tuesday, while the dollar rose 0.3
percent at 102.51 yen after posting its biggest one-day
gain since mid-January a day earlier. 
    The greenback was also up 0.2 percent against the Swiss
franc at 0.8885 franc.
    Demand for safety faded on Tuesday after Russian President
Vladimir Putin played down the prospect of a war in Ukraine, but
market players remained on watch as Russian stock markets 
 fell more than 1 percent on Wednesday.
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