Jobs data knocks the US dollar down (page 1 of 2)

Euro

The European currency was under pressure against the dollar after a slew of manufacturing surveys, at the beginning of the week shortened by Labour Day holiday in the U.S., showed the euro zone economy improving but at a slower pace than the U.S.

The Reuters Euro zone Purchasing Manufacturing index came out at 49.1 in August from 48.0 in July, edging closer to the 50 level that would mark a return to growth. The euro fell to 4½ month lows against the greenback as optimism grew that the U.S. and Japanese economies would recover faster than their euro-zone counterparts.

Nevertheless, the U.S. dollar failed to gain much impetus after the release of strong ISM data. A stronger than expected manufacturing report from the Institute for Supply Management failed to spark a dollar rally given jobs are still being lost in the sector.

The August manufacturing index rose to 54.7, the highest since December last year, from 51.8 in July, easily beating economists' expectations for a reading of 53.8.

Midway through the week the euro remained steady against the greenback after crashing to $1.0767 levels, it's lowest since April. Dollar's brief rise was mainly contributed to buoyancy in the stock markets based on growth expectations. Data out of U.S. failed to push the greenback higher, mainly due to profit taking ahead of employment report at the end of the week.

Federal Reserve's 'beige book' report, an snapshot of conditions across the United States, confirmed recent data indicating the U.S. economy strengthened in July and August. End of the week saw the dollar falling broadly after a poor weekly jobs report frightened investors ahead of the all important August employment data, which is critical in determining the health of the U.S. economy.

Weakness in the dollar came after claims for unemployment benefits rose above 400,000, an important level that indicates weakness in job growth.

Claims rose by 15,000 to 413,000 in the week ended Aug. 30 - above economists' expectations for a small decline to 390,000. Given that employment is viewed as the last critical piece of the U.S. recovery, the markets ignored a barrage of other strong economic reports highlighting second-quarter productivity, August service sector growth and July factory orders.

The euro surged to a two-week high on the last trading day of the week due to a sombre jobs report which cast doubt on the economic recovery in the United States and showed that the US cut jobs at their fastest pace since March.

The August jobs report showed non-farm payrolls fell 93,000 versus forecasts for a 12,000 rise, while the jobless rate declined to 6.1 percent
from 6.2 percent. Analysts where expecting no change.

Range for the week: $1.0850 - $1.1350

Yen

The yen started the week on a firm footing mainly due to a surprise revelation that Japan had not carried out yen-selling intervention in August despite it appreciating late last month due to growing demand from foreign investors wanting to buy Japanese stocks.

Speculation surrounding the reasons behind non-intervention ranged from John Snow's visit to Asia and an upcoming report by the Treasury to the congress on currency manipulation, which is due by mid October.

Still many traders were reluctant to drive the yen higher after earlier comments from Japan's forex chief, Zembei Mizoguchi, who said that recent movements in the foreign exchange market had been speculative and warned of action if moves turn volatile.