Dollar slides versus euro

The dollar slid versus the euro on Friday, as investors locked in gains and pared back safe-haven trades on the greenback, emboldened by US payrolls data showing job losses were less severe than many had feared. The euro/dollar pair usually tracks the performance of US equities, falling when stocks are getting hammered.
But on Friday, Wall Street shares were down for the most part and the dollar still fell against the euro, although it came off its lowest levels. This suggested that, in the currency market at least, the employment report that showed job declines of 651,000 last month was not as dismal as the markets worst expectations. Risk appetite in the currency market was moderately evident, with the rise in higher-yielding units such as the Australian and New Zealand dollars and some emerging market currencies, such as the Brazilian real, Thai baht, and Mexican peso.
Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York, said since the jobs number was largely in line with market forecasts, there was a semblance of risk appetite in the market "and so the dollar has come off against the euro."
"But I still believe that the dollar has not yet seen its highs. I still have a healthy respect for this uptrend," he added. Fridays jobs report showed that on top of steep job losses last month, the jobless rate surged to a 25-year high at 8.1 percent.
The euro rose above $1.27 to its highest level against the dollar in a week and in the late afternoon session was at $1.2638, still up 0.6 percent on the day. The dollar lately has tended to rise in response to horrible economic data because investors see it as the safest store of value at a time when economies across the globe are contracting sharply.
Sterling also hit a one-week high above $1.43 before retreating to $1.4081, down 0.4 percent. The dollar rose 0.4 percent versus the yen to 98.31 yen, erasing earlier losses as investors recovered some taste for risk. The yen has struggled recently as Japanese exports plummet and the economy weakens sharply.
The dollar fell 0.8 percent to 1.1597 Swiss francs. The Australian dollar rose 0.6 percent to US $0.6408, as did the New Zealand dollar, which climbed 0.7 percent to US $0.5022. Some investors said the dollars rally to multi-month highs against a number of major currencies this week, including the euro and yen, was also driving Fridays sharp reversal.
"The dollar tested recent highs over the past few sessions, so the moves were seeing now are not surprising," said Todd Elmer, senior currency strategist at CitiFX in New York. In the week ahead, strategists expect the dollar to regain its bid tone with more evidence of a deepening global recession.
"Ongoing jitters about the state of the US financial and auto sector, speculation of further steps to support major US banks should keep the VIX (volatility) index elevated, which is a positive for the US dollar," said Brown Brothers Harriman in a research note. Analysts said the picture gets even gloomier for other parts of the world, including the euro zone, which still faces flagging growth and a worsening slump in Eastern Europe.
A top International Monetary official on Friday told a UK newspaper that developed economies were in the worst slump since World War Two and said it could last into next year. In that atmosphere, "dollar assets remain an attractive option to risk averse investors, especially as other central bank rates converge to zero and more unconventional policies are implemented," said UBS currency strategist Brian Kim.