Dollar rally fizzles after boost by US jobs report
Sunday, 7 October 2007
NEW YORK, Oct 06 (AFP): A spirited rally by the dollar on the heels of astrong report on US job creation in September ran out of steam yesterday as the news was not enough to sustain investor confidence in the greenback.
The single European currency, the euro, fetched 1.4134 dollars at 2100 GMT, little changed from 1.4136 dollars late Thursday in New York.
But the euro in mid-afternoon fell to a two-week low of 1.4033 dollars on news that the US economy last month created 110,000 jobs.
Significantly, the agency revised up its estimate for August to show a gain of 89,000 jobs, instead of a loss of 4,000.
The news suggested that the world's biggest economy might not be heading for recession and that the US Federal Reserve would not now be in a rush to lower interest rates, which would make the dollar less attractive.
"It was an all-round good (jobs) report and initially the dollar gained on the back of that," said Ian Stannard of BNP Paribas.
"But the bigger picture suggests the dollar performance is going to be far more mixed."
The dollar managed to hold some gains on the Japanese currency, trading at 116.94 yen from 116.50 on Thursday.
Bear Stearns currency analyst Steve Barrow said the failure of the dollar to hold its gains against the euro reflected a lack of market demand for the greenback.
"The payroll numbers this month were as unambiguously good as they were unambiguously bad last month, but the data is not really all that important any more," he said. MORE
David Rodriguez at Forex Capital Markets said some holders of dollars, especially central banks, may have jumped at the opportunity to sell the greenback on the news, believing that it may be the best price for some time.
"Authorities clearly pounced on the opportunity to sell dollars on a strong intraday rally, and such patterns have shown few signs of slowing through recent trade," he said.
"Further speculation that key economies will sell more dollar holdings leave little scope for a short-term rebound. Indeed, there remain very few traders willing to load up on US dollar long positions in the face of an overwhelming downtrend."
The dollar in recent weeks has come under heavy selling pressure on speculation that the Federal Reserve, which reduced borrowing costs by half a point last month, will continue to cut its benchmark interest rate as signs emerge of a slowdown in US momentum.
The single European currency, the euro, fetched 1.4134 dollars at 2100 GMT, little changed from 1.4136 dollars late Thursday in New York.
But the euro in mid-afternoon fell to a two-week low of 1.4033 dollars on news that the US economy last month created 110,000 jobs.
Significantly, the agency revised up its estimate for August to show a gain of 89,000 jobs, instead of a loss of 4,000.
The news suggested that the world's biggest economy might not be heading for recession and that the US Federal Reserve would not now be in a rush to lower interest rates, which would make the dollar less attractive.
"It was an all-round good (jobs) report and initially the dollar gained on the back of that," said Ian Stannard of BNP Paribas.
"But the bigger picture suggests the dollar performance is going to be far more mixed."
The dollar managed to hold some gains on the Japanese currency, trading at 116.94 yen from 116.50 on Thursday.
Bear Stearns currency analyst Steve Barrow said the failure of the dollar to hold its gains against the euro reflected a lack of market demand for the greenback.
"The payroll numbers this month were as unambiguously good as they were unambiguously bad last month, but the data is not really all that important any more," he said. MORE
David Rodriguez at Forex Capital Markets said some holders of dollars, especially central banks, may have jumped at the opportunity to sell the greenback on the news, believing that it may be the best price for some time.
"Authorities clearly pounced on the opportunity to sell dollars on a strong intraday rally, and such patterns have shown few signs of slowing through recent trade," he said.
"Further speculation that key economies will sell more dollar holdings leave little scope for a short-term rebound. Indeed, there remain very few traders willing to load up on US dollar long positions in the face of an overwhelming downtrend."
The dollar in recent weeks has come under heavy selling pressure on speculation that the Federal Reserve, which reduced borrowing costs by half a point last month, will continue to cut its benchmark interest rate as signs emerge of a slowdown in US momentum.