Reuters: US Dollar Report: FOREX-Dollar falls versus yen, euro after jobs data

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FOREX-Dollar falls versus yen, euro after jobs data Jun 1st 2012, 16:08 Fri Jun 1, 2012 12:08pm EDT * Euro comes off 23-month low vs dollar, but downtrend remains * Safe-haven yen rises, market wary of intervention * U.S. economy adds only 69,000 jobs in May, jobless rate rises By Wanfeng Zhou NEW YORK, June 1 (Reuters) - The dollar fell against the euro and yen on Friday after a gloomy U.S. jobs report fuelled talk the Federal Reserve may need to take further monetary easing measures to prop up the fragile economy. The euro came off a 23-month low against the dollar as traders scrambled to cover bets against the single currency after driving it down 7 percent in May. But it surrendered most gains later and analysts said the euro's downtrend remained. U.S. employers created a paltry 69,000 jobs last month, the fewest since May last year, and the unemployment rate rose for the first time since June. The data added to a slew of recent weak numbers suggesting the economic recovery was faltering. "The 'Green Shoots' that were providing confidence in the U.S. economy are being mowed over as quickly as they appear," said Douglas Borthwick, managing director of Faros Trading in Stamford, Connecticut. "The non-farm payrolls number gives considerable political capital for the U.S, Federal Reserve to announce further (quantitative easing)," he added. "As the U.S. is reaching peaks for the year, further QE could see this position under extreme stress." The dollar fell 0.3 percent to 78.15 yen, after hitting as low as 77.65 on Reuters data, the weakest since mid-February. Earlier in New York trading, the dollar jumped to 78.27 yen from a session low with traders citing market rumors of intervention by Japanese authorities to weaken the yen. Japan's Ministry of Finance declined to comment. Brown Brothers Harriman head of global currency strategy Marc Chandler said there was talk in the market of Japan checking rates but said there was no evidence of actual intervention. Analysts at Action Economics said there was market speculation the Fed checked rates on the BOJ's behalf. "It just shows how much nervousness is out there right now," Chandler said. Japan stepped up warnings that it could intervene to curb the safe-haven yen's recent climb, saying the rise was being driven by speculators and that it would act decisively if excessive market moves continued. A separate report on U.S. factory activity in May showed some slowing but suggested the economy was not falling off a cliff. "The evidence continues to build that the U.S. economy is losing momentum and the ISM supports that," said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York. "The conversation within the Federal Reserve of (a third round of quantitative easing) has to be on the table." Short-term U.S. interest rates futures for delivery in 2014 and beyond implied traders now see no chance the Federal Reserve will raise until second quarter of 2015. The Fed has pledged it would not budge from its near-zero rate policy target until at least late 2014. COORDINATED ACTION? The euro rose 0.2 percent to $1.2382, rebounding from a session low of 1.2286, the weakest since July 1, 2010. It had climbed as high as $1.2456 on Reuters data, helped by market talk of coordinated monetary easing by the G20 over the weekend. "If there is a joint (central) bank move Sunday night, I don't think it is end game for the crisis -- checkmate on preventing a euro unraveling," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut. "It will be an opportunity for many people still long risk to exit at less worse levels." The European Central Bank meets next week and market speculation is growing that the ECB will cut rates from their record low of 1 percent, but a Reuters poll showed economists expected it to hold fire. The euro zone common currency also hit its weakest since December 2000 of 95.57 yen, before recouping some losses to trade at 96.80 yen, little changed on the day. Bank of Spain data on Friday showed Spaniards sent money abroad in droves, worried about the health of the country's banks. A net 66.2 billion euros ($82.0 billion) was sent abroad in March, the most since records began in 1990. "It is looking very bearish for the euro with the latest capital flows data showing a significant amount leaving Spanish banks, all of which indicate they will probably need official help," said Peter Kinsella, currency strategist at Commerzbank. Any help from the European rescue fund for Spain would mean an additional tax burden on Germany, Europe's paymaster, and could hurt the safe-haven status of German bunds, he added. "It is not a situation where there is much help for the euro and chances are it is headed towards $1.20." Link this Share this Digg this Email Reprints

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