October 5, 2012 / 4:40 PM / 5 years ago

FOREX-Dollar hits two-week high vs yen on jobs; euro rallies

* U.S. unemployment rate drops to 4-year low
    * Jobs report won't keep Fed from doing QE
    * Bank of Japan keeps monetary policy steady

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 5 (Reuters) - The dollar climbed to two-week
highs against the yen on Friday after U.S. data showed the
unemployment rate dropped to a near four-year low in September.
    The euro also soared to a two-week high versus the greenback
and yen after the U.S. jobs data increased investors' confidence
about the U.S. economy and prompted them to buy currencies that
offer higher returns than the dollar and the yen. The New
Zealand dollar, as well as the Norwegian and Swedish kronas,
also gained against the greenback and the yen as a result of
this improvement in risk sentiment.
    While the number of new jobs created last month was broadly
in line with expectations, the unemployment rate was lower than
expected, and payroll figures for July and August were revised
higher by 86,000 jobs. 
    "The details were about as good as they realistically could
be under the circumstances," said Michael Woolfolk, senior
currency strategist at BNY Mellon in New York.
    The euro rose as high as $1.3071, the highest since
Sept. 19. It was last at $1.3047, up 0.2 percent.
    Against the yen, the euro advanced to a two-week peak of
102.80, and by midday, it was up 0.5 percent at 102.63
    Some analysts said the U.S. jobs data was not strong enough
for the Federal Reserve to consider ending monetary easing. 
    Marc Chandler, global head of currency strategy at Brown
Brothers Harriman in New York, for instance, described the U.S.
employment report as "decidedly mixed." He cited the household
survey, which showed 873,000 new jobs created - "the most in a
couple of decades" - but two-thirds of those positions were
part-time jobs. 
    He also pointed to data in the report showing factories lost
16,000 jobs in September. Over the past three months, factories
have lost about 21,000 net jobs.
    "The favorable trend for manufacturing employment has
clearly leveled off," Chandler said.
    The employment report temporarily took investors' minds away
from the euro zone's debt crisis. While the euro posted gains on
the U.S. jobs data, investors were wary of pushing it higher. 
    Market participants are still awaiting Spain's request for
aid, a move that would prompt the European Central Bank to buy
its bonds and lower the country's borrowing costs. That would be
be viewed as positive for the euro.
    ECB President Mario Draghi said on Thursday that everything
was in place for the central bank to buy the bonds of struggling
euro-zone countries like Spain and conditions linked to it need
not be punitive. 
    Spanish 10-year debt yields have declined - a positive sign
- and the euro has rallied since the ECB announced its plan to
buy bonds of debt-stricken countries, in anticipation of Spain
eventually seeking financial assistance. But that positive
momentum may not last.
    "The longer Spain prevaricates on the aid front, the more
likely it is that the market will price out this bailout
premium," said Richard McGuire, senior fixed-income strategist
at Rabobank, in London.
    Investors are also wary of buying the yen on concerns that
the Japanese authorities could intervene to weaken it. Japanese
officials have expressed concerns about the strength of the yen
in recent weeks.
    The yen earlier nudged higher after the Bank of Japan kept
monetary policy unchanged and held off from additional easing
measures. The reaction was limited, however, as Friday's
decision was in line with expectations. 
    Traders said the dollar would probably find support from
buyers at 78.00 yen, while resistance came in at the
100-day moving average around 78.83 yen.
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