Reuters: US Dollar Report: FOREX-Dollar drops, euro rallies on U.S. jobs data, crisis hopes

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FOREX-Dollar drops, euro rallies on U.S. jobs data, crisis hopes Aug 3rd 2012, 20:44 Fri Aug 3, 2012 4:44pm EDT * U.S. hiring picks up, not enough to sideline Federal Reserve * Market players reassess ECB stance on bond-buying * Poll shows most expect more Fed monetary stimulus * Speculators decrease long U.S. dollar bets in latest week By Julie Haviv NEW YORK, Aug 3 (Reuters) - The dollar fell on Friday as better-than-expected U.S. jobs growth in July and hopes that European authorities could contain the region's debt crisis had investors embracing risk, causing the biggest one-day gain in a month for the euro. The euro zone common currency was already trading stronger before the jobs data as people took a more optimistic view of Thursday's European Central Bank meeting in which the bank signalled further support for debt-stricken Spain and Italy. U.S. employers in July hired the most workers in five months but an increase in the jobless rate to 8.3 percent kept prospects of further monetary stimulus from the Federal Reserve on the table, a negative for the dollar. The Fed this week sent a strong signal that a new round of major support could be on the way if the recovery did not pick up. Despite improved U.S. hiring last month, most Wall Street economists still expect the Federal Reserve to launch another round of monetary stimulus this year, with the majority expecting action as soon as September, according to a Reuters poll. Investors bought the euro, which tumbled during the previous session, as the focus shifted from the lack of immediate ECB policy action to the fact that a path has been laid out that would allow for a much more forceful ECB move. "The euro and most foreign currencies are higher as markets reversed some of the initial disappointment following yesterday's ECB announcement," said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York. "Overall, this week's trifecta of key market events has produced more good than bad." The euro rose as high as $1.2392 on Reuters data and was last up 1.6 percent at $1.2378, its best day since the end of June. Risk-taking also buoyed the euro against the yen. The single currency rallied 2.1 percent to 97.24 yen. Spanish Prime Minister Mariano Rajoy inched closer on Friday to asking for an EU bailout for his country but said he needed first to know what conditions would be attached and what form the rescue would take. Currency speculators decreased their bets in favor of the U.S. dollar to the lowest since May 1 in the latest week, according to data from the Commodity Futures Trading Commission released on Friday. Positioning after Draghi's press conference following the ECB policy announcement on Thursday will only be reflected in data collated Aug. 7 and released Aug. 10. "While the path for foreign exchange markets going forward will undoubtedly remain uneven, we view this week's events as consistent with U.S. dollar and yen weakness, and strength in other G10 and emerging currencies in the coming weeks and months," Bennenbroek said. Recent highs for the euro around $1.2390/1.2406 were expected to be strong resistance for the euro, with speculators and long-term investors such as reserve managers looking to sell the euro on any bounce, traders said. The ECB said on Thursday it will draw up plans in the coming weeks to make outright purchases to stabilize euro zone borrowing costs, disappointing hopes for quick action to address the debt crisis. It indicated any intervention would not come before September, and bank President Mario Draghi also said intervention would come only if governments activated the euro zone's bailout funds to join the ECB in buying bonds. "Compared to expectations two weeks ago, the ECB has delivered something more," Jens Nordvig, global head of currency strategy at Nomura Securities in New York, wrote to clients. "This does not mean that the euro crisis is over, but it does improve the risk distribution for certain euro zone assets and global risk assets more generally." The dollar gained 0.4 percent against the yen, to 78.54 yen , according to Reuters data. Link this Share this Digg this Email Reprints

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