The dollar rose broadly on Friday, spurred by the US August payrolls report, which showed an unexpected dip in the unemployment rate and confirmed market expectations of a dollar-boosting interest rate hike in September
Analysts, however, said the jobs data were not decisive enough to provide long-term direction for the currency.
"The dollar reacted favourably to the data not necessarily due to the absolute increase in payrolls, but because of a decrease in the unemployment rate, as well as a revision to the previous month's data," said Kathy Lien, chief strategist at Forex Capital Markets.
The government said the economy produced 144,000 new non-farm payroll jobs in August, compared with economists' forecasts of 150,000. The unemployment rate fell to 5.4 percent from 5.5 percent in July.
July's payroll numbers were upwardly revised more than two-fold to 73,000 jobs and June job creation was bumped up to 96,000 new jobs from 78,000.
The relatively solid jobs data appeared, at least momentarily, to assuage the market's concerns over the durability of the US economic recovery. It also confirmed the Federal Reserve is likely to boost rates later this month.
By mid-morning in New York, the euro hit a session low of $1.2052, and was down 1.0 percent.
The dollar edged up against the yen to 109.84 yen, erasing losses incurred before the jobs data. Sterling fell to about a three-month low of $1.7771.
"The Fed will be very much undeterred by the number and justifies them raising 25 basis points in September and surveying the landscape as we move along," said Jason Bonanca, foreign exchange analyst at Credit Suisse First Boston.
"No one had expected the unemployment rate to decline, and the fact that it did was bullish for the dollar. But none of this was significant enough to force the euro out of its recent range. It's still trapped in a range of $1.1950 and $1.2450," said Forex Capital's Lien.
The market barely reacted to a survey showing growth in the giant US services segment slowed more expected in August.
"Don't really apply too much (of the market's moves) in terms of economic fundamentals. A lot of this has to do with the long weekend and people tidying up their books," said Thomas Molly, a trader at Bank Leumi USA.
Analysts believe the dollar's direction will be clearer next week when many vacationing traders return and when Federal Reserve chief Alan Greenspan testifies before Congress on the US economy.
"If (Greenspan) continues to be bullish and he reiterates the effects on the economy now are transitory, then the euro could move back down to $1.1950," said Lien.
The Federal Reserve has already raised rates twice since late June. But at 1.5 percent, US base rates are still half a percentage point below euro zone rates.
The euro hardly reacted to an earlier report that the eurozone's services sector grew more slowly last month as high oil prices raised costs and dented confidence. The market also ignored news that Russian special forces troops had stormed into a school building to resolve a hostage situation in the Russian city of Beslan.
Comments
Comments are closed.