FOREX-Dollar climbs versus euro after U.S. jobs data

Fri Dec 7, 2012 11:09pm IST

* U.S. non-farm payrolls rise 146,000 in November
    * Euro extends post-ECB fall; Germany cuts growth outlook
    * Yen briefly strengthens after Japan earthquake

    By Wanfeng Zhou
    NEW YORK, Dec 7 (Reuters) - The dollar edged higher against
the euro on Friday after a government report showed U.S.
employment grew more than expected in November, but the
less-encouraging details limited gains.
    The dollar had soared immediately after the data as the
stronger-than-expected headline number stoked speculation the
Federal Reserve could opt for a smaller stimulus program next
week. But it pared gains versus the euro and turned slightly
lower against the yen as traders scrutinized the details. 
    While nonfarm employment increased by 146,000 jobs last
month, showing little apparent impact from superstorm Sandy, job
growth for previous months was revised lower and a drop in the
jobless rate to a near four-year low was because people gave up
the search for work. 
    "There's a lot of speculation on how much impact Sandy has
on the data. The number just feels wrong," said Ronald Simpson,
managing director of global currency analysis at Action
Economics in Tampa, Florida. "That's why we've seen things come
unwound back to pre-data levels because everybody is going to
look ahead and wait for the revisions."
    The euro fell to a session low of $1.2878 on Reuters data,
matching the low set on Nov. 28. It was last down 0.2 percent at
$1.2936.
    The common currency pared losses in late morning trade, with
traders citing a Market News International report that said
senior European Central Bank Executive Board members, including
President Mario Draghi and Bundesbank President Jens Weidmann,
opposed a rate cut supported by the majority at the ECB's most
recent policy meeting on Thursday.
    "Whether this reduces the likelihood of a cut going forward,
the forex market perceives a more hawkish than dovish stance and
created significant short covering," said Andrew Wilkinson,
chief economic strategist at Miller Tabak & Co LLC in New York.
    Weakness in the euro came as Germany's central bank said it
expected Europe's largest economy to grow just 0.4 percent in
2013, and pointed to risks of a recession as the euro zone debt
crisis takes its toll. 
    The euro lost 0.8 percent against the dollar on Thursday
after ECB President Mario Draghi said policymakers had discussed
cutting borrowing costs and slashed growth and inflation
forecasts for the euro zone.   
    ECB policymaker Jozef Makuch said the bank may cut interest
rates next year if the euro zone economy does not improve.
 
    Attention now turns to the U.S. central bank, which begins a
two-day meeting on Tuesday. Policymakers are expected to
maintain support for the tentative U.S. recovery by ramping up
one bond-buying program to offset the expiration of another.
    "The real question is whether (the jobs data) changes the
Fed's attitude toward more stimulus. It doesn't remove the need
for stimulus but might convince the Fed to opt for a smaller
program," said Kathy Lien, managing director of BK Asset
Management in New York.
    Fed stimulus is viewed as negative for the dollar because it
equates to printing money, which lowers U.S. bond yields and
diminishes the appeal of holding dollar-denominated assets.
    The dollar rallied as high as 82.82 yen on Reuters
data, matching a near eight-month high set on Nov. 22. It was
last at 82.36 yen, down 0.1 percent on the day.
    The yen briefly rose against the euro and dollar after news
of an earthquake in Japan. A far more powerful earthquake in
March 2011 led to a sharp rise in the yen on expectations
Japanese investors would repatriate funds held abroad.
    Investors also closely watched developments on the U.S.
"fiscal cliff" debate.
    Republican House Speaker John Boehner accused U.S. President
Barack Obama of pushing the country toward the "fiscal cliff" on
Friday and of wasting another week without progress in the
talks.
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