* U.S. non-farm payrolls report showed pickup in jobs
* Data does not resolve debate on Fed's winding down of QE
* Dollar on track for worst weekly loss vs yen in nearly 3
By Julie Haviv
NEW YORK, June 7 The dollar on Friday recovered
its sharp losses from the previous session after a government
report showed a reasonably healthy pace of U.S. job creation in
May, renewing expectations that the Federal Reserve might curb
its asset purchases later this year.
Weak labor market data this past week had most investors
expecting a downbeat figure going into the non-farm payrolls
report, but U.S. employers increased their hiring a bit more
than expected last month, showing resilience in the sector.
The Labor Department's report showed that the U.S. economy
created 175,000 jobs in May, with the unemployment rate edging
up to 7.6 percent last month from 7.5 percent in April.
Analysts were also heartened by the separate household survey,
which showed higher employment in May.
Investors are increasingly coming to terms with the idea
that the Fed this year would begin to reduce its quantitative
easing program - its $85 billion in monthly purchases of
Treasuries and mortgage-backed securities to support the economy
- perhaps as soon as September.
Traders of short-term U.S. interest rate futures still
expect the Fed to hold rates near zero until early 2015.
The Fed's bond-buying program is widely seen as negative for
the dollar as it is considered tantamount to printing money.
"We do not see the number as providing clarity on the state
of improvement in labor markets and the potential for a
reduction in the pace of asset purchases by the Fed," said
Michael Gapen, senior U.S. economist at Barclays Capital in New
He added that the improvement in the labor market remained
moderate, and if anything, the trend suggested that the U.S.
economy was slowing in the second quarter.
"In our view, this means that the Fed is unlikely to take a
decision to taper purchases at its June meeting, preferring
rather to see several more employment reports before the
September FOMC meeting," Gapen said.
In early afternoon trading, the euro was down 0.3 percent at
$1.3208. It hit a peak on Thursday at $1.3306, its highest in
more than three months, after European Central Bank President
Mario Draghi gave no hints that further monetary easing was
The euro, however, was poised to end the week on a high note
with gains of about 1.8 percent, its best weekly showing since
Against the Japanese yen, meanwhile, the dollar
rebounded to hit a session highs at 97.75 yen, recovering from a
two-month low earlier in the day. Just before the U.S. jobs
report, the dollar was down 1.6 percent.
On Thursday, the greenback suffered its biggest one-day drop
against the yen in three years.
It was last trading up 0.7 percent at 97.60 yen.
Technical analysts said the dollar may be poised to move
"Because Friday's intraday recovery has been substantial,
dollar/yen could be moving in the direction of a broader
recovery back up towards 100 and then 103," said James Chen,
chief technical strategist at City Index Group.
"This view would be strengthened on a strong push above 98
yen," he said. "To the downside, the key level to watch has been
established at 95 support, a breakdown below which could signal
a significantly larger correction targeting potential downside
around 92 and then 90."
For the week, the dollar was on track to post its worst
weekly loss since mid-July 2009.
The greenback also posted gains against the Swiss franc and
sterling as well as the Australian and New Zealand dollars.
But the U.S. dollar fell against the Canadian currency, with
the loonie benefiting from a report that showed Canada added a
robust 95,000 jobs in May, its largest monthly addition of new
jobs in 11 years.
By midday, the U.S. dollar was down 0.4 percent at C$1.0220