Thursday July 3, 2008 - 17:50:31 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar gains broadly after jobs data, ECB remarks
FOREX-Dollar gains broadly after jobs data, ECB remarks
* Dollar rises broadly after U.S. jobs data
* ECB hikes rates to 4.25 pct as expected
* Trichet remarks on rates less aggressive than expected
(Recasts; updates prices)
NEW YORK, July 3 (Reuters) - The dollar rallied on Thursday
after payroll data suggested the U.S. job market and economy
are as dire as many investors had feared, while the European
Central Bank president struck a less aggressive tone on
prospects for interest rate hikes.
Demand for the greenback started to rise after the U.S.
jobs report for June landed largely as forecast and nowhere
close to a scenario feared by investors.
"The unemployment number really didn't break the dollar's
back. The market was so bearish that I thought we would see a
minus-100 (thousand job-loss) print, so this is moderately good
news," said Boris Schlossberg, senior currency strategist, at
DailyFX.com in New York.
Payrolls fell 62,000, the Labor Department said, the sixth
straight month of declines and the longest losing streak for
the labor market since 2002. For details, see [ID:nN03278198].
At the same time the jobs data was released, ECB President
Jean-Claude Trichet said the current level of euro zone
interest rates would help achieve the bank's price stability
goal. The ECB earlier raised its key rate by a widely expected
quarter percentage point to 4.25 percent.
Analysts said the remarks suggest the ECB rate hike was a
one-off event and that further rises will depend on economic
data. Trichet also said downside risks to the euro-zone economy
"Trichet is being cautious. He's leaving the door open to
the possibility of further hikes if inflation goes higher. But
he doesn't want to spook markets into pushing the euro even
higher," Schlossberg added.
In mid-afternoon trading in New York, the euro was last 1.2
percent lower on the day at $1.5694 <EUR=>, its biggest one-day
drop since April 24 at current prices. The dollar was also 1
percent higher against a basket of currencies .DXY and last
traded at 72.765.
The euro rose earlier to as high as $1.5909 in the run-up
to the ECB decision, its highest since April 23. But further
gains failed to materialize once Trichet said in a press
conference that the current rate stance will contribute to
achieving the bank's price stability objective.
Trichet "dropped his hawkish stance and moved to a more
neutral one. That doesn't rule out another rate hike down the
road, but it counters what the market was pricing in," said Meg
Browne, a senior currency strategist at Brown Brothers Harriman
in New York. "People were a bit long euros coming in and now
they are cutting positions."
Against the yen, the dollar jumped almost 0.8 percent to
trade at 106.72 <JPY=>. With Japanese rates seen on hold at an
ultra-low 0.5 percent, the yen was hurt as ECB rate hike
expectations put yield differentials back on the market's
The dollar pared some of its gains versus the yen after
another report showed a weaker-than-expected reading on the
U.S. service sector in June.
The Institute for Supply Management's non-manufacturing
index came in at 48.2 for June, compared with 51.7 in May. A
reading below 50 signals contraction. Economists had expected a
reading of 51.0, according to a Reuters poll.
U.S. markets will be closed on Friday in observance of the
U.S. Independence Day holiday. Trading will resume on Monday.
(Reporting by Nick Olivari; Additional reporting by Steven C.
Johnson and and Vivianne Rodrigues; Editing by James
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