Dollar falls versus yen, euro after jobs data
NEW YORK |
NEW YORK (Reuters) - The dollar fell against the euro and yen on Friday after a gloomy U.S. jobs report fuelled talk the Federal Reserve may need to take further monetary easing measures to prop up the fragile economy.
The euro rebounded off a 23-month low against the dollar as traders scrambled to cover bets against the euro zone common currency after driving it down 7 percent in May.
Sharp losses for the greenback ensued after Washington reported U.S. employers created a paltry 69,000 jobs last month. It was the fewest since May last year, and the unemployment rate rose for the first time since June. The data added to a slew of recent weak numbers suggesting the economic recovery was faltering.
"The 'green shoots' that were providing confidence in the U.S. economy are being mowed over as quickly as they appear," said Douglas Borthwick, managing director of Faros Trading in Stamford, Connecticut.
"The nonfarm payrolls number gives considerable political capital for the U.S. Federal Reserve to announce further (quantitative easing)," he added. "As the U.S. is reaching peaks for the year, further QE could see this position under extreme stress."
The euro waxed and waned as the day progressed only to revisit session highs heading into the close of trade.
"There are a lot of shorts out there and I think given the magnitude of the move and the volatility of the jump off the lows this morning just under $1.23 (0.800 pounds), we might see some squaring up into the weekend," said Robert Sinche, global head of currency strategy at RBS in Stamford Connecticut.
Short positions, or bets against the euro taken by currency speculators in the options market, hit a record high in the latest week, according to data compiled by the Commodities Futures Trading Commission and Reuters.
"If there was some aggressive policy announcement over the weekend, people tend to buy back what they have been short and certainly there have been a lot of euro shorts out there," he said.
While potential remedies for Europe's credit crisis might be proposed over the calm of the weekend, investors will navigate monetary policy decisions from the European Central Bank, Bank of England, Reserve Bank of Australia and testimony from U.S. Federal Reserve Chairman Ben Bernanke before the U.S. Congress.
The dollar fell 0.27 percent to 78.14 yen, after hitting as low as 77.65 on Reuters data, the weakest since mid-February.
Earlier in New York trading, the dollar jumped to 78.27 yen from a session low with traders citing market rumours of intervention by Japanese authorities to weaken the yen.
Japan's Ministry of Finance declined to comment. RBS's Sinche and Brown Brothers Harriman head of global currency strategy Marc Chandler both cited talk in the market of Japan checking rates but said there was no evidence of actual intervention. Analysts at Action Economics said there was market speculation the Fed checked rates on the BOJ's behalf.
"It just shows how much nervousness is out there right now," Chandler said.
Japan stepped up warnings that it could intervene to curb the safe-haven yen's recent climb, saying the rise was being driven by speculators and that it would act decisively if excessive market moves continued.
A separate report on U.S. factory activity in May showed some slowing but suggested the economy was not falling off a cliff.
The euro traded up 0.40 percent to $1.2406, rebounding from a session low of $1.2286, the weakest since July 1, 2010. It had climbed as high as $1.2456 on Reuters data, helped by market talk of coordinated monetary easing by the G20 over the weekend.
"If there is a joint (central) bank move Sunday night, I don't think it is end game for the crisis - checkmate on preventing a euro unravelling," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut. "It will be an opportunity for many people still long risk to exit at less worse levels."
Market speculation is growing the ECB will cut rates from their record low of 1 percent but a Reuters poll showed economists expected it to hold its fire.
The euro zone common currency also hit its weakest since December 2000 of 95.57 yen, before recouping losses to trade at 96.90 yen, up slightly on the day.
Bank of Spain data on Friday showed Spaniards sent money abroad in droves, worried about the health of the country's banks. A net 66.2 billion euros ($82.0 billion) was sent abroad in March, the most since records began in 1990.
"It is looking very bearish for the euro with the latest capital flows data showing a significant amount leaving Spanish banks, all of which indicate they will probably need official help," said Peter Kinsella, currency strategist at Commerzbank.
(Additional reporting by Nick Olivari, Steven C. Johnson, Julie Haviv and Richard Leong; Editing by James Dalgleish)
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