The dollar soared on Friday, its best showing against major currencies this year, with strong jobs data suggesting the US economy was on the mend even as other economies struggle. The greenback neared an 11-month peak above 82 yen and was on track for a fifth straight weekly gain against Japan's currency, its best run in almost five years.
-- Euro weakens as economy overshadows Greek debt deal
-- Dollar on track for 5th straight week of gains vs yen
Fear of a euro zone recession, meanwhile, knocked the euro to a three-week low of $1.3095, overshadowing the completion of a debt swap that cut Greece's debt burden and cleared the way for more emergency aid. "We've had all the right pieces fall into place for the dollar," said Kathy Lien, head of research at GFT Forex. "There's a general feel-good mood about the US economy. Companies are hiring, consumer confidence is rising and equities markets are rallying."
Added Nick Bennenbroek, head of currency strategy at Wells Fargo: "We're getting steady improvement in the US while the European economic situation remains challenging." US employers added 227,000 jobs in February, marking the third month in a row that payrolls grew by more than 200,000.
The Federal Reserve has said it intends to keep interest rates near zero until 2014, but if the US data trend persists, some analysts say it may have to reconsider any plans for additional monetary easing. The Fed will hold a policy meeting next week. The euro was last down 1.2 percent at $1.3113, while the dollar was changing hands at 82.36 yen, up 1 percent and near the day's peak of 82.64, a 10-1/2 month high.
Against a basket of six major currencies, the dollar was up 1.1 percent, its biggest daily gain since December. Japan's economy remains mired in deflation and markets expect more monetary easing to come as the country tries to engineer higher inflation and a return to growth.
Growth has also been slowing in China, and the European Central Bank on Thursday lowered its growth forecast for the 17-nation euro zone. The sunnier outlook for the US economy also boosted the Canadian dollar and Mexican peso, currencies from countries with strong trade ties to the United States.
The euro may face more selling pressure next week, particularly after an industry group said Greece's debt swap constituted a credit event and triggered payout on default insurance contracts worth more than $3 billion. "It gives speculators a reason to continue pushing the euro the current direction," said BNY Mellon currency strategist Michael Woolfolk.
Other debt-laden European countries may also run into trouble, analysts said. European Commission representatives have been in Spain to evaluate its 2011 budget deficit, which came in much higher than expected. Spain has defied the European Union and softened this year's budget deficit target. But Lien said the worst news for the euro was out of the way now, which means the currency might be able to recoup some of its losses next week.
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