November 2, 2012 / 11:36 AM / 5 years ago

FOREX-Dollar firm vs yen and euro before U.S. jobs data

* Upbeat U.S. private payrolls data boosts dollar
    * Yen hampered by Japan's trade deficit, economic woes
    * Euro has been hit by Greek court ruling on austerity steps

    By Philip Baillie
    LONDON, Nov 2 (Reuters) - The dollar rose to a near four
month-high against the yen on Friday as investors bet on an
upbeat U.S. payrolls report after private employers added jobs
at the fastest pace in eight months.
    The euro fell to a three-week low against the dollar on
selling by long-term investors.
    The euro has also been under pressure since a Greek court
ruled on Thursday that pension reform demanded by foreign
lenders may be unconstitutional. That raised concerns about
Athens' ability to implement the austerity measures needed to
secure bailout funds. 
    All these drove the dollar index to a seven-week high
of 80.389, breaking above its 55-day moving average of 80.14.
    The dollar was up 0.2 percent on the day at 80.31 yen, just
shy of last week's four-month high of 80.38. Traders reported an
option barrier at 80.50 yen with hedge funds ready to buy the
dollar on dips if the U.S. jobs numbers disappointed.
    A break of resistance at 80.60-65, a chart triple top marked
between May and June and a 50 percent retracement of the
dollar's March to September decline, could signal further gains.
    "A good U.S. jobs number will no doubt give a leg up to
dollar/yen," said John Hardy, currency strategist at Saxo Bank.
    "From a medium-term view, we are bullish on dollar/yen and
the pair has established a base around 79 yen for a rally to 88
yen in a year's time," he said.
    The yen has come under pressure because recent Japanese data
and corporate earnings have been soft. Third-quarter economic
output data, due on Nov. 11, is also likely to have contracted.
    By contrast, recent U.S. data have pointed to a recovery.
Payrolls processor Automatic Data Processing said private
employers added 158,000 workers last month, bolstering
expectations that the non-farm payrolls report due at 1230 GMT
may beat forecasts. 
    A Reuters poll forecasts a rise of 125,000 U.S. non-farm
payrolls in October. The unemployment rate is seen ticking up to
7.9 percent. 
    Any market reaction to the jobs data may be short-lived
given the uncertainty of the outcome of Tuesday's U.S.
presidential election.
    Some, however, are less sure about a sustained rise in the
dollar as investors fret over the so-called "fiscal cliff" of
looming tax rises and spending cuts in the United States.
    "Over the course of the next month we would expect to move
lower in dollar/yen, any upside above 81 would be surprising
driven by U.S. negativity surrounding the fiscal cliff," said
Christian Lawrence, currency strategist at Rabobank.
    The euro fell 0.4 percent to $1.2885, a three-week
low, as traders sold the single currency, triggering an option
barrier at $1.2880. Bids from Asian central banks and Middle
East investors were cited below $1.2850.
    However, the euro held within the $1.2800-3200 range seen
since September, underpinned by the European Central Bank's
pledge to buy bonds of indebted euro zone countries that seek
    Signals in the option market showed the pair was likely to
trade in a range in coming weeks. The one-month implied
volatility on euro/dollar options fell to fresh five-year lows
around 7.50 percent.
    Data on Friday showed peripheral euro zone countries were
still struggling. Spain's manufacturing sector shrank last month
at it fastest pace since July, while Italian factory activity
shrank in October for the 15th month running.
    Commodity currencies eased after rallying earlier in the
day. The Australian dollar hit a five-week high of $1.0420
before giving up gains to stand at $1.0380 as caution
set in before the U.S. jobs data. 
    The currency was helped by Thursday's improvement in
manufacturing data from China, Australia's main export market.

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