Dollar Firms on Positive U.S. Jobs Report

Friday, 05 November 2010 08:55 AM

The dollar extended its advance from a nine-month low versus the euro as government data showed U.S. employers added more jobs than forecast last month, increasing payrolls for the first time since May.

The common currency had retreated earlier as reports showing European retail sales unexpectedly fell and Spain’s economy stagnated renewed concern that so-called peripheral countries will struggle to plug budget deficits. The Canadian dollar declined against the greenback after employers added fewer jobs than economists predicted last month.

“It’s a very pleasant surprise,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. “This has helped the dollar. This could cause a little bit of profit-taking on some of those long positions.” A long position is a bet a currency will gain.

The dollar advanced 0.9 percent to $1.4087 per euro at 8:45 a.m. in New York, from $1.4207 yesterday. It gained 0.8 percent to 81.36 yen, from 80.75 yen yesterday. The euro slipped 0.1 percent to 114.56 yen, from 114.71.

Payrolls climbed 151,000, exceeding the median estimate of economists surveyed by Bloomberg News and following a revised 41,000 drop the prior month that was smaller than initially estimated, Labor Department figures showed today in Washington. Private payrolls that exclude government agencies also gained more than forecast, while the jobless rate held at 9.6 percent, reflecting a decline in the size of the labor force.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six trading partners including the yen and euro, touched the lowest level in 11 months yesterday. It has declined 1.9 percent since the last jobs report a month ago, when overall payrolls slipped and private payrolls increased by a less-than-forecast 64,000 jobs.

ECB Exit Strategy

The greenback fell against all of its 16 most-traded counterparts yesterday as the European Central Bank signaled it will likely stick with its stimulus-exit strategy even as the Federal Reserve buys an additional $600 billion in Treasuries to spur employment and avert deflation. The pound rose as the Bank of England refrained from adding to its asset purchases.

The policy-setting Federal Open Market Committee said Nov. 3 it will buy about $75 billion in government bonds each month through June in a strategy called quantitative easing that pumps money into the U.S. economy and debases the dollar. The Fed has kept interest rates near zero since December 2008 to try to stimulate the economy.

Policy makers aim to accelerate U.S. economic growth above a 2.5 percent annual rate to push unemployment lower. A measure of inflation watched by the Fed, the personal consumption expenditures index, minus food and energy, rose 1.2 percent in September from a year earlier. The jobless rate has exceeded 9 percent since May 2009.

‘Disappointingly Slow’

The Fed said in a statement Nov.3 it was compelled to act because progress toward its objectives of full employment and stable prices “has been disappointingly slow.”

The latest Treasuries purchases come on top of $1.7 trillion of securities the central bank bought through last March to fight the financial crisis.

ECB President Jean-Claude Trichet signaled yesterday the bank intends to pursue its strategy to end emergency stimulus.

“The non-standard measures are by definition temporary in nature,” Trichet said at a press conference in Frankfurt today after the ECB left its benchmark interest rate at 1 percent.

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The dollar extended its advance from a nine-month low versus the euro as government data showed U.S. employers added more jobs than forecast last month, increasing payrolls for the first time since May.The common currency had retreated earlier as reports showing European...
Friday, 05 November 2010 08:55 AM
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