I guess Japan is playing her role in the election year! What next?
Reuters
Job Data Hurts Dollar Against All But Yen
Friday March 5, 3:52 pm ET
By John Parry
NEW YORK (Reuters) - The dollar fell sharply on Friday against most major currencies after U.S. payrolls data showed far fewer new jobs than expected in February, diminishing chances of an interest rate hike in 2004, but the U.S. unit surged to five-month highs against the yen.
Against the Japanese currency, traders' suspicions of hefty dollar-buying intervention lifted the dollar above 112 yen.
Traders said on Friday they suspected, although had not seen, that Japan had raised the bar for its yen-weakening interventions, designed to protect the competitiveness of Japanese exporters.
Several trading sources in New York said the Bank of Japan had intervened in large amounts to buy dollars for yen.
"Clearly the widespread sentiment in the market is that it is Japanese authorities here who are pushing up the dollar/yen. We are approaching some technical levels which could add some life to this," said a foreign exchange analyst in New York.
The resistance areas were 112.75 yen, a move above which could take the dollar up to 113.55 yen and above, he said.
Traders said a wide array of private sector investors were bidding for dollars against the yen.
But the dollar was hurt against most other major currencies in the wake of a sorely disappointing U.S. employment report.
The U.S. Labor Department reported only 21,000 jobs were created last month, compared with an increase of 97,000 jobs in January, itself a downward revision. The jobless rate held steady at 5.6 percent in February.
Economists had forecast the addition of 125,000 jobs and for the jobless rate to remain at 5.6 percent.
Market expectations of an increase in official interest rates, which would make yields on U.S. assets more attractive, was a factor behind recent dollar strength. But those expectations had been partly conditional on a strong U.S. employment report, which failed to materialize.
"We do not think that the dollar decline is over," said Lauren Germain, currency strategist at Bank of America in New York.
In late afternoon New York trade, the euro was at $1.2370 (EUR=), up about 1.5 percent on the day. The dollar bought 112.03 yen (JPY=), up 0.9 percent.
The euro traded at 138.63 yen (EURJPY=), a gain of about 2.4 percent. At its highest point of around 138.96 yen, the euro stood at an eight-month high.
The dollar fell about 1.3 percent to 1.2759 Swiss francs (CHF=), while sterling rose about 1.3 percent to $1.8458 (GBP=).
Following the employment report, analysts emphasized the potential for the dollar to return to its two-year decline.
"It puts markets in the position of (having to) wait yet another month for the promised payrolls gains to materialize," said Lara Rhame, senior economist at Brown Brothers Harriman in New York, referring to predictions by Federal Reserve officials that the labor market would improve.
"I think this would reinforce the Fed holding rates steady for a very long time," she said.
Financial markets pushed back their expectations for an interest rate hike until after the November U.S. presidential election, Wall Street economists said.
The weak payrolls number shows that the job market still lags other parts of the U.S. economy that have been showing steady signs of improvement in recent months.
Bets for a strong jobs report had boosted the dollar this week to 2004 peaks versus the yen and the euro. A stronger gain might have freed up the Federal Reserve to raise interest rates from the current 1 percent, the lowest since 1958, sooner rather than later. A rate hike would make yields on U.S. assets more attractive to investors, increasing demand for dollars. (Additional reporting by Kyle Peterson in Chicago and Burton Frierson in London) |
