Reuters: US Dollar Report: FOREX-Dollar drops vs yen on U.S. jobs data; euro lower

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FOREX-Dollar drops vs yen on U.S. jobs data; euro lower May 4th 2012, 16:32 Fri May 4, 2012 12:32pm EDT * U.S. economy adds 115,000 jobs in April, well below forecast * Yen soars on safe-haven flows; Aussie, kiwi tumble * Weak data, weekend elections keep euro vulnerable By Wanfeng Zhou NEW YORK, May 4 (Reuters) - The dollar slipped against the yen in volatile trading on Friday after a government report showed U.S. employers added fewer jobs in April than expected, providing further evidence the economic recovery was losing momentum. The euro edged lower, while the Australian and New Zealand dollars tumbled as the data prompted investors to shed riskier, growth-linked currencies for safer investments such as Treasuries. U.S. employers added 115,000 workers last month, well below expectations of 170,000. The unemployment rate fell to 8.1 percent but only because more people left the workforce. Jobs growth in previous months was revised upwards. The data followed a string of weak readings on the economy that fueled speculation of more monetary stimulus from the Federal Reserve. "On balance, it was a disappointing report," said Vassili Serebriakov, currency strategist at Wells Fargo in New York. "It looks like it's kind of a risk-off environment where the yen is doing well." The dollar fell 0.4 percent to 79.86 yen having hit a session low of 79.79, not far from a 10-week low of 79.62 yen set on Tuesday. Trading was volatile, with the pair bouncing between session highs and lows immediately after the release of the data. Some analysts said the jobs report, combined with recent weaker-than-expected services sector and first-quarter economic growth data, may spur the Fed to engage in a third round of 'quantitative easing' - dubbed 'QE3' - to keep interest rates low and spur growth. "The headline disappointment increases the likelihood that (Fed Chairman Ben) Bernanke will move forward with QE3 later this summer in an attempt to further bolster employment growth," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. But other analysts, such as Ronald Simpson, managing director of global currency analysis at Action Economics in Tampa, Florida, said the latest rhetoric from Bernanke and other Fed officials suggests the U.S. central bank is "solidly on hold for the time being. "The U.S. data have been a little bit soft over the last week or so, but we're still expanding," he said. "I don't think there's any reason to panic; maybe later, but not yet." U.S. short-term interest rate futures were little changed after the payrolls data, implying nearly no change in traders' expectations in Fed policy. EURO DOWNSIDE The euro fell 0.4 percent to $1.3094, having dropped as low as $1.3081, the lowest since April 19. Against the yen, it lost 0.8 percent to 104.57 yen. It had earlier hit a low of 104.42, the weakest since mid-February. Adding to pressure on the euro zone common currency was a survey showing the zone's services sector contracted much more than initially thought in April, with particularly weak figures out of Italy and Spain. Investors were cautious ahead of weekend elections in France and Greece, the results of which may stir doubts about the countries' commitment to fiscal austerity. Market participants fear that parties that disagree with Europe's focus on fiscal discipline will gain sway. The euro has been trading in a tight range of $1.30 to $1.34 in recent weeks but analysts said worries about a deepening recession in the euro zone suggest a break lower. "Even with U.S. numbers not impressive, European numbers have been outright bad this week. The euro will find the fundamental backdrop increasingly challenging," Wells Fargo's Serebriakov said. The Australian dollar lost 0.7 percent to $1.0193, having hit a nearly four-month low. The New Zealand currency dropped 0.5 percent to $0.7954. Link this Share this Digg this Email Reprints

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