Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--The dollar has kept on climbing against other major currencies in European trading hours Monday, building on the gains it made after a much stronger than expected reading of U.S. jobs data Friday.
Key non-farm payrolls data smashed expectations Friday, showing the U.S. shed 11,000 jobs in November, against expectations for a decline of 125,000. Previous readings were revised upwards, too.
That pushed the dollar sharply higher, particularly against the yen. Monday, most of that momentum continued, with the euro moving below $1.48 for the first time in a month. Sterling also kept on falling, as did key commodity currencies like the Canadian, Australian and New Zealand dollars.
See a chart of the euro's performance against the dollar Monday here:
http://www.dowjoneswebservices.com/chart/view/3143
This is unusual. Typically, stronger-than-expected U.S. data readings boost investors' sentiment over global growth prospects and bolster their confidence, pushing the dollar lower as traders move away from the dollar positions they fled to in earlier times of stress. Friday's dollar move, and its extension Monday, indicate that this pattern is starting to break down, with traders starting to buy bucks in anticipation of U.S. rate hikes ahead.
"The correlations between currencies, economic data and risk appetite are loosening," said Gareth Berry, a currencies analyst at UBS in Singapore.
But Berry, like many other analysts, warned it is likely too soon to expect a full-scale shift in dollar trading patterns from here, particularly as U.S. rate rises are still a distant prospect.
"While we remain of the conviction that a dollar-positive regime change is likely, we doubt that the time for it has come yet," said Michael Hart, a senior currencies analyst at Citigroup in London.
Instead, the dollar's surge may reflect little more than a large unwinding of hefty negative dollar bets, which reached their highest levels since March 2008 last week, according to data from the Commoditity Future Trading Commission released late Friday.
While the dollar gained against the euro, sterling and other key currencies Monday, it edged a little lower against the yen.
Traders said Japanese exporters showed themselves to be keen sellers of the dollar against the yen overnight, as they booked profits after Friday's sharp move.
"Because many Japanese companies have set their in-house foreign exchange rate at the Y90 mark, there seems persistent dollar-selling pressure around that level," said Yuzo Sakai, a foreign-exchange manager at Tokyo Forex & Ueda Harlow.
The data calendar was sparse in European hours, and a speech by European Central Bank President Jean-Claude Trichet yielded nothing to move the currency markets around.
Looking ahead, Fed President Ben Bernanke speaks at 1745 GMT. His speech "deserves attention, particularly after the positive surprise in non-farm payrolls on Friday," said analysts at UniCredit.
At 0945 GMT, the euro was trading at $1.4793, below the $1.4847 level it held late in New York Friday, according to EBS. However, the dollar was weaker at Y89.93 against the yen, from Y90.50, while the euro was also a little lower at Y133.10 from Y134.29.
Sterling was weaker at $1.6373 from $1.6448, while the dollar was stronger against the Swiss franc, at CHF1.0215 from CHF1.0186.
The Dollar Index, which tracks the dollar's value against a trade-weighted basket of six other major currencies, was trading at 75.753 from 75.788.
-By Katie Martin, Dow Jones Newswires; 44 20 7842 9346; katie.martin@dowjones.com
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