Reuters: US Dollar Report: FOREX-Dollar drops as US payrolls data revives Fed action talk

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FOREX-Dollar drops as US payrolls data revives Fed action talk Apr 6th 2012, 16:10 Fri Apr 6, 2012 12:10pm EDT * Underwhelming U.S. jobs report weighs on dollar * Euro bounces from lows, Spain debt worries persist * Options market reflect bias to euro weakness By Julie Haviv NEW YORK, April 6 (Reuters) - The U.S. dollar dropped broadly on Friday in thin holiday trade after disappointing U.S. jobs market data kept alive the prospect of more Federal Reserve monetary policy support. The dollar fell against the euro for the first time in five days after data showed U.S. payrolls rose far less than expected in March, offsetting sentiment that held throughout the week in which Fed minutes from its March meeting had investors downplaying more Fed action. "It is a disappointment," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, D.C. "I think it highlights the fact that the Fed's door is still open to more asset purchases this year." The euro was last up 0.2 percent at $1.3086, bouncing from a three-week low of $1.3033 hit the previous day. Dismal data, fears about Spain's debt levels, and expectations that European Central Bank policy should remain accommodative has the euro on track to notch a 2.1 percent loss this week. Activity was light and trading desks thinly staffed, however, with the U.S. stock market closed and bond market closed early in observance of the Good Friday holiday. Much of Asia was off as well. "Monday's price action will be a lot more telling as participants in the U.S. and abroad digest today's jobs data," said Daniel Hwang, senior currency strategist at Forex.com in New York. Hwang said euro uptrend technical support converges around $1.3150, the 100-day simple moving average. "Raised expectations of Fed stimulus should cause some consolidation of the dollar next week, especially after this week's gains, and I think the euro is likely to test that support level." The euro was also weighed by worries about Spain's high debt level as the hangover from a poor debt auction earlier in the week fueled concerns over the country's ability to tackle its fiscal problems. "I'm negative on the euro. It's likely to keep extending losses below $1.30 as there's no event that could stop its decline amid worries over Spain," said Sumino Kamei, senior currency analyst at Bank of Tokyo-Mitsubishi UFJ in Tokyo. Against the yen, the euro was at 106.72, down 0.7 percent after hitting a one-month trough at 106.52. Unease about the prospect of the euro was reflected in the options market, with three-month risk reversals in the euro/dollar biased for euro puts, trading at -2.10 vols on Friday, up from 2.00 vols on Thursday's and -1.92 vols earlier in the week. Euro/yen three-month risk reversals also showed partiality against the euro, trading at -3.65 vols, up from -3.45 vols on Thursday. Broad euro selling led the euro to come close to 1.20 Swiss francs, a level breached the previous day for the first time since the Swiss National Bank set that level as a cap for the Swiss currency in September 2011 in a bid to curb a sharp rise. The euro hit a low of 1.2004 francs, according to Reuters data, before recovering to last trade at 1.2008. The dollar last traded at 81.58, down 0.9 percent and on track for a 1.7 percent loss on the week. Link this Share this Digg this Email Reprints

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