Friday April 6, 2007 - 17:30:58 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Dollar rallies on unexpectedly strong US jobs report
FOREX-Dollar rallies on unexpectedly strong US jobs report
Fri Apr 6, 2007 11:23am (Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 6 (Reuters) - The dollar rose broadly on Friday, hitting a fresh five-week high against the yen, as a surprisingly strong U.S. jobs report reinforced the view the Federal Reserve will not cut interest rates in the near term.
The robust March jobs report eased concerns about the weakening U.S. housing market and signs of softness in U.S. manufacturing.
"This could well be the strongest economic report we've had out in the first quarter," said Michael Woolfolk, senior currency strategist at Bank of New York.
"It suggests that the U.S. economy is on a firmer ground than earlier thought and the Fed need not cut interest rates under the current circumstances," he added.
Interest rate futures fell, with the implied prospects of a June rate cut by the Fed falling to 12 percent from 20 percent before the data was released.
Midday in New York, the euro was down 0.4 percent against the dollar to $1.3371. Against the yen, the dollar rose as high as 119.38 yen , the highest since Feb. 27, before trading back down to 119.33.
The dollar was up 0.5 percent against the Swiss franc at 1.2215 francs , while sterling slipped 0.3 percent to $1.9645.
Data on Friday showed U.S. non-farm payrolls totaled 180,000 last month, exceeding the median forecast in a Reuters poll for 120,000. The government also revised up its estimate for jobs created in January and February -- by 16,000 each month -- to 162,000 and 113,000 respectively. For details on the report, click on [ID:nN05191151].
Analysts said the dollar's rally after the jobs data could be fleeting.
Marc Chandler, chief global currency strategist at Brown Brothers Harriman in New York, said the narrowing interest rate differential and diverging economic growth paths between the United States and euro zone could weigh on the dollar.
The European Central Bank holds a policy meeting next week, although investors are expecting the bank to hold euro zone interest rates steady at 3.75 percent. However, analysts believe the ECB will prepare financial markets for a rate increase in June and possibly one more by year-end.
"Dollar headwinds remain intact. Euro zone growth differentials...(are) decidedly dollar negative. The dollar's gains may prove short-lived," Chandler said.
The next key event for the market will be the minutes of the Federal Open Market Committee's March meeting, which are due on Wednesday.
The minutes should provide some details behind the wording change in the Fed statement from that meeting. The Fed left rates on hold at 5.25 percent, but dropped a phrase in its statement pointing to future monetary policy tightening.
Analysts expect the minutes to express concern about lingering inflationary pressures in the U.S. economy and, at the same time, acknowledge softness in the housing market.
Overall, the expected balanced outlook from the FOMC minutes should firm expectations for the dollar to trade in narrow ranges in the coming sessions.
Â© Reuters 2007. All Rights Reserved.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."