Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The dollar continued to decline against its major rivals Friday morning, after a disappointing payrolls report for December painted a darker picture of a U.S. economy many had thought was brightening.
The worse-than-expected jobs data quash some hopes the economy is healing to such an extent the U.S. Federal Reserve can abandon its policy of ultra-low interest rates, which weigh on the dollar.
"The disappointing release should have a lasting impact on the dollar because it will force traders to pare back rate hike expectations," said Kathy Lien, a director of currency research at GFT Forex in New York
In morning trading, the euro was at $1.4408 from $1.4320 late Thursday, according to EBS via CQG. The dollar was at Y92.36 from Y93.28, while the euro was at Y133.06 from Y133.57. The U.K. pound was at $1.6096 from $1.5936. The dollar was at CHF1.0264 from CHF1.0337.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 77.396 from 77.953.
U.S. nonfarm payrolls fell by 85,000 last month. Economists surveyed by Dow Jones Newswires had expected a decline of 10,000 jobs, but some suggested the data would point to the first month of job creation since December 2007. As it turned out, November payrolls were revised to show a gain of 4,000 jobs from an originally reported decrease of 11,000.
The dollar had begun a recent rally against the euro in early December 2009, with the release of the last non-farm payrolls report, scoring one of its best days of the year.
While the dollar has suffered in the wake of the latest payrolls disappointment, its losses so far have not been catastrophic and the greenback has not fallen back to its early December levels against its major rivals.
Still, "the payroll number confirms the trend that weaker U.S. data is going to be negative for the dollar," said Jacob Oubina, currency strategist at Forex.com in Bedminster, N.J.
A better-than-expected November number had brought forward expectations that interest rates could rise sooner than expected. The latest payroll numbers could throw water on those expectations.
The labor market has been seen as lagging behind other parts of the economy, keeping pressure on the U.S. Federal Reserve to keep ultra-low interest rates in place for an extended period of time.
Overnight, the dollar had been trapped in a tight range against most of its rivals, gaining slightly, as investors awaited the payrolls data.
The dollar fell overnight from its highest level since Aug. 28 against the yen after fresh Japanese government comments that raised doubts over the nation's commitment to stemming potential yen rises. Prime Minister Yukio Hatoyama criticized Finance Minister Naoto Kan's explicit call the day before for a lower yen.
"The government basically shouldn't comment on foreign exchange," Hatoyama said.
Kan, for his part, toned down his rhetoric, saying at a news conference, "in general, markets should determine" exchange rates.
Canada Morning
The Canadian dollar was higher Friday morning after volatile trading in response to the release of Canadian and then U.S. jobs data for December.
The U.S. dollar was trading at C$1.0318 from C$1.0357 late Thursday.
The Canadian dollar weakened off sharply after Statistics Canada reported that employment declined by 2,600 in December, considerably weaker than the expected gain of 20,000 and the increase of 79,100 in November. The U.S. dollar reached a session high of C$1.0382 in the aftermath of that report, according to EBS via CQG.
It subsequently retreated, and dropped back into the C$1.0350 area after news that U.S. lost 85,000 jobs in December.
A report from BMO Capital Markets said that not a great deal has changed for the overall outlook for the U.S./Canadian dollar pair. "USD/CAD remains at the lower end of the recent range and although the risk continue to mount for a corrective retracement, longer term players should still look to use any decent retracement as a [Canadian dollar] buying opportunity," BMO said.
-By Bradley Davis, Dow Jones Newswires; 212-416-2654;
bradley.davis@dowjones.com
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