FOREX-Dollar falls vs basket of currencies after US data

Trade the News

Saturday September 04, 2010 09:56:14 AM GMT

* Risk appetite increases; yen, Swiss franc under pressure

* U.S. payrolls fall less than expected in August

* U.S. service sector activity slows in August (Updates prices, adds quote, details)

By Wanfeng Zhou

NEW YORK, Sept 3 (Reuters) - The U.S. dollar fell against a basket of currencies on Friday after a surprisingly strong U.S. jobs report eased worries about the outlook for the economy and boosted appetite for riskier assets.

The safe-haven yen and Swiss franc weakened broadly, while higher-yielding currencies such as the Australian dollar gained as expectations grew the U.S. labor market may not be as bad as many had feared.

U.S. non-farm payrolls fell 54,000, the Labor Department said, a much smaller drop than expectations for a decline of 100,000. In addition private employment, considered a better gauge of labor market health, increased 67,000. For details, see [ID:nN02227856]

Optimism about the economy, however, faded slightly after separate data showed the U.S. non-manufacturing sector grew at a slower-than-expected pace in August and that the sector's employment shrank that month.

"This does take some of the shine off of today's better-than-expected payrolls report," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

The ICE Futures U.S. dollar index <.DXY>, which tracks the greenback versus a basket of six currencies, last fell 0.3 percent to 82.226.

The dollar earlier rallied more than 1 percent to a session high of 85.22 yen <JPY=>, according to Reuters data. It pared most gains after the weaker-than-expected ISM services data and last traded up 0.2 percent at 84.42 yen.

The dollar hit a 15-year low of 83.58 yen on electronic trading platform EBS late last month on fears the U.S. economic recovery was stalling.

The euro traded at $1.2855 <EUR=>, up 0.2 percent. It also gained 0.4 percent to 108.52 yen <EURJPY=>.

While the jobs report might mitigate fears of a double-dip recession, some analysts cautioned that the U.S. economy is still in for a slow recovery. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic on the jobless data:

http://link.reuters.com/wuj39n ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

"Just as trading on the bad U.S. data recently was overdone, I think sentiment on this week's positive reports is also going to be overdone," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York. "You have a lot of people unemployed, so it's a long way back to normal."

The euro rose to 0.6 percent to 1.3073 against the Swiss franc <EURCHF=>, coming off from an all-time low around 1.2850 earlier this week. The dollar was up 0.3 percent at 1.0160 francs <CHF=>.

An increase in risk appetite lifted commodity currencies. The Australian dollar rose 0.4 percent to US$0.9144 <AUD=>, while the New Zealand dollar rose 0.7 percent to US$0.7192 <NZD=>. The Canadian dollar also gained, with the greenback falling 0.8 percent to C$1.0449 <CAD=>. (Additional reporting by Nick Olivari and Steven C. Johnson; Editing by Chizu Nomiyama)

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