Reuters: US Dollar Report: FOREX-Dollar rallies broadly, lifted by upbeat U.S. data

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FOREX-Dollar rallies broadly, lifted by upbeat U.S. data Oct 3rd 2012, 15:29 Wed Oct 3, 2012 11:29am EDT * ADP report showed U.S. added 162,000 private-sector jobs * Euro expected to hold above $1.28 * Investors uncertain about Spanish bailout By Gertrude Chavez-Dreyfuss NEW YORK, Oct 3 (Reuters) - The dollar rose across the board on Wednesday after data showed a rise in U.S private-sector jobs and service-sector activity last month, increasing optimism that the world's largest economy may be on a more stable path to recovery. The greenback touched two-week highs against the yen and gained against most currencies, including sterling as well as the Canadian, Australian and New Zealand dollars. Upbeat U.S. data can only boost the dollar from here on, analysts said, given that the Federal Reserve has already announced a third round of monetary stimulus for the economy. The Fed's move is viewed as negative for the greenback because it entails flooding the market with dollars, depressing its value. U.S. private-sector employers added 162,000 jobs in September, exceeding consensus forecasts, while a U.S. service sector activity index from the Institute for Supply Management picked up last month.. Few analysts, though, would stake their bets on an ADP report many feel is not an accurate reflection of the U.S. labor market. Analysts also were worried about the drop in the employment index of the ISM services-sector index, which could augur badly for Friday's U.S. non-farm payrolls report. "The ISM and the ADP report suggest that jobs growth may not be as strong as economists expect," said Kathy Lien, managing director at BK Asset Management in New York. She added that while private-sector payrolls beat expectations, the increase was lower than the previous month. The dollar rose as high 78.58 after the data, its highest since Sept. 19. It was last at 78.57 yen, up 0.5 percent on the day. Jamie Coleman, currency strategist at Forexlive.com in Boston, cited bankers as he noted an uptick in speculative demand for dollar/yen on an improving technical backdrop. "Jawboning from the new finance minister and threats of foreign bond buying by the Japanese authorities are helping improve sentiment toward the greenback," Coleman said. The euro, meanwhile, edged lower against the dollar, as investors grew uncertain about the prospects of Spain seeking a bailout, a move that would prompt the European Central Bank to buy Spanish bonds and lower the country's borrowing costs. Prime Minister Mariano Rajoy on Tuesday quashed speculation the country could apply for a bailout as soon as this weekend. Most market participants, though, were convinced that Spain will eventually request aid, which could push the euro above $1.30 again. The single currency was last down less than 0.1 percent at $1.2907, well above the three-week low of $1.2802 hit on Monday. It may test Tuesday's peak of $1.2968. Investors are now looking ahead to key policy meetings from the European Central Bank and the Bank of England this week. Marc Chandler, global head of FX strategy at Brown Brothers Harriman in New York, believes the BOE is likely to wait until next month to announce additional easing measures, giving itself more time to assess the domestic economy and global headwinds. He also thinks the ECB would wait it out as well, and he expects more clarification from ECB President Mario Draghi about the bank's bond-buying program. STRUGGLING AUSSIE The Australian dollar fell broadly. Other commodity- and growth-linked currencies like the Canadian and New Zealand dollars followed suit after Australia posted its biggest trade deficit in 3-1/2 years as falling prices for iron ore and coal dented export earnings. The euro rose to a 3-1/2 month high of A$1.2664, while the Australian dollar also fell against the U.S. currency to US$1.0193, its lowest level since Sept. 6. The Aussie was last at US$1.0219, down 0.5 percent. Against the Canadian dollar, the U.S. dollar also hit an almost one-month high of C$0.9884. The Aussie was also weighed down by expectations that domestic interest rates will be cut further, after the Reserve Bank of Australia on Tuesday cut its cash rate by 25 basis points to 3.25 percent, the lowest level in three years. Link this Share this Digg this Email Reprints

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