The dollar fell broadly on Monday in the wake of weak US jobs data and comments from a Federal Reserve official that US interest rates are likely to stay low for quite some time. The dollar was also dented by improved investor appetite for risk after strong Chinese export data boosted optimism the global economy is recovering. This lifted the euro and commodity-linked currencies such as the Australian dollar.
Data on Friday showed US employers cut 85,000 jobs last month, disappointing many who had expected the US economy to stop losing jobs. The dollar extended falls on Monday after St. Louis Federal Reserve Bank President James Bullard said rates may remain low for quite some time.
"The dollar went sour after the non-farm payrolls data. If the data didn't meet expectations then it feeds the thought that there will be a prolonged period of time before the Fed hikes rates, which is what Bullard said," said Dag Muller, strategist at SEB in Stockholm. "Stocks are higher too and oil is bid, which is another driver of a weaker dollar," he said.
By 1220 GMT, the dollar index was down 0.7 percent at 76.907, having hit 76.859, its weakest since mid-December. The latest data from the Commodity Futures Trading Commission showed speculators cut US dollar long positions - bets the currency will appreciate - in the week to January 5, and traders say that trend is likely to pick up.
The euro rose 0.8 percent to $1.4530 having hit its highest in more than three weeks at $1.4546. The next big resistance is seen around $1.4570 and a break of that would suggest a gradual recovery towards $1.4800, traders said. "There is a risk - if this move higher in euro/dollar continues - that more people will exit dollar long positions," SEB's Muller said.
The Australian dollar struck a new five-week high versus the US dollar of $0.9325, buoyed by an unexpected jump in Chinese export numbers, a rise in gold prices and by data showing a jump in Australian job advertisements. "The global recovery story has received a shot in the arm with the quick rebound in Chinese exports. The Fed is in no hurry to tighten, Asia is leading the global recovery so the dollar is weaker across the board," said Chris Turner, head of currency strategy at ING in London.
The Norwegian crown was another outperformer, hitting a one-month high against the dollar and a 15-month high against the euro after above-forecast Norwegian inflation data strengthened expectations for more rate hikes. The Swiss franc turned lower against the euro after Swiss National Bank chairman Philipp Hildebrand said the central bank would fight any excessive appreciation of the Swiss franc against the euro.
Hildebrand's remarks sparked concern the SNB may intervene to keep its currency from appreciating after the euro earlier hit a 10-month low of around 1.4725 francs. By 1220 GMT it was up 0.1 percent at 1.4767 francs. For an analysis on the Swiss franc and market concerns about possible intervention click on
The dollar's next test is expected to be the US earnings season which kicks off this week, and US retail sales, industrial production and inflation data. The euro's gains against the dollar may be limited, however, due to concerns about the sovereign debt of some euro zone countries.
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