Thursday November 5, 2009 - 21:52:55 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar up modestly ahead of jobs data
Thu Nov 5, 2009 4:05pm EST
* Euro hits session peak after Trichet comments
* Major currencies in ranges before jobs report Friday
* BoE ups QE by 25 bln sterling, low end of forecasts (Updates prices)
By Steven C. Johnson
NEW YORK, Nov 5 (Reuters) - The dollar edged up against major currencies on Thursday, recovering some recent losses, as investors booked profits before a U.S. employment report expected to shed more light on the health of the economy.
The greenback fell in the prior session after the Federal Reserve kept interest rates at record lows and signaled they were likely to stay there for some time to come.
It lost more ground earlier Thursday after European Central Bank President Jean-Claude Trichet sounded an optimistic note about a 2010 recovery and hinted at a slow-motion exit strategy for some emergency stimulus measures. For more see [ID:nECBNEWS].
But euro gains above $1.49 were short-lived, and analysts said investors were largely moving to the sidelines ahead of Friday's jobs report, expected to show a slower pace of U.S. job losses but another rise in the unemployment rate.
"This is really going to be a serious indicator of the relative health of the U.S. economy," said John McCarthy, director of foreign exchange at ING Capital Markets in New York. "Until you see jobs recover, you are not going to get any sustainability in the economic turnaround, nor are you going to get any reason for the Fed to tighten."
An index that measures the dollar against six other major currencies rose 0.1 percent .DXY, while the euro, the biggest component of that basket, was unchanged at $1.4874 EUR=. It rose as high as $1.4917 earlier in the day.
The dollar rose 0.1 percent to 90.76 yen JPY=. Sterling was up 0.1 percent at $1.6582 GBP=, off a $1.6636 peak.
Wall Street rallied, providing more evidence that the inverse relationship between the dollar and equities was showing signs of breaking down.
For much of the past year, the dollar has tended to fall when stocks rise, a reflection of high risk appetite and investor preference for stocks, commodities and higher-yield currencies over the low-yielding dollar.
FED STILL SEEN LAGGING THE PACK
Both the ECB and Bank of England left interest rates on hold Thursday, as did the Fed the day before, though sterling initially rose after the bank increased its asset buying program by less than many had expected. [ID:nL5152809]
That suggested the BoE may be signaling a slow withdrawal of emergency measures, while some analysts said the Fed's move to cut the amount of housing agency debt it buys might also be a nod in the same direction. [ID:nN05111848]
But the Fed was still seen by many as likely to be a laggard when it comes to normalizing policy, and that was likely to keep the dollar under pressure.
"We are still biased for the euro to push higher," said Tom Fitzpatrick, chief technical strategist at Citigroup in New York. "I don't know that we'll make it to $1.60 by year end but retesting those (2008) highs is certainly a possibility in the early part of 2010."
Improvement in the job market is crucial to get the Fed thinking about higher interest rates.
"I don't think anybody expects a substantial improvement in the job market, and the unemployment rate has a serious potential of breaking 10 percent tomorrow," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey. (Additional reporting by Wanfeng Zhou; Editing by James Dalgleish)
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