June 7, 2013 / 8:21 PM / in 5 years

FOREX-Dollar rebounds as U.S. jobs data shows economic resilience

* U.S. nonfarm payrolls report showed pickup in job creation
    * Speculators cut long-dollar bets in past week
    * Fed's Plosser says central bank should end bond-buying
    * Dollar on track for worst weekly loss vs yen in nearly
three years

    By Julie Haviv
    NEW YORK, June 7 (Reuters) - The dollar on Friday recouped
sharp losses posted the previous session after a government
report showed reasonably healthy U.S. job creation in May,
renewing expectations the Federal Reserve might scale back its
massive asset purchases later this year.
    Weak labor market data earlier this week had weighed on the
dollar, with most investors expecting a downbeat figure going
into the nonfarm 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 the current third
round of its quantitative easing program to support the economy,
dubbed QE3, perhaps as soon as September. 
    The program - $85 billion in monthly purchases of Treasuries
and mortgage-backed securities - is widely seen as negative for
the dollar as it is considered tantamount to printing money.
    Currency speculators trimmed bets in favor of the U.S.
dollar for the first time in five weeks in the latest week,
according to data released on Friday by the Commodity Futures
Trading Commission. 
    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. It was last trading up
0.5 percent at 97.38. For the week, the dollar was down 3.1
percent versus the yen, its worst weekly loss since July 2009.
    On Thursday, the greenback had suffered its biggest one-day
drop against the yen in three years. 
    Vassili Serebriakov, foreign exchange strategist at BNP
Paribas in New York, said he expects dollar/yen to reach 108 by
year end.
    "Over-stretched long dollar positions have been going
through a squeeze over the past week. We expect this to continue
in the near term, before the dollar can resume its uptrend," he
    "We do not expect any QE 'tapering' announcement until
December, but managing expectations will remain a key task for
the Fed considering the recent volatility in rates," he said.
    The latest U.S. jobs report showed that government spending
cuts have so far not been as damaging as some feared,
Philadelphia Fed President Charles Plosser told Reuters on
Friday, adding it only entrenched his opinion that the central
bank should reduce its bond buying "now." 
    Traders of short-term U.S. interest rate futures still
expect the Fed to hold rates near zero until early 2015.  
    "We do not see the (jobs) 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 late afternoon trading, the euro was down 0.2
percent at $1.3218. 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 imminent for the euro zone.
    The euro, however, was poised to end the week on a high note
with gains of about 1.7 percent, its best weekly showing since
    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, an 11-year high. 
    By late afternoon, the U.S. dollar was down 0.5 percent at
C$1.0208, according to Reuters data.
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