US employment data revives the dollar

Euro

The European single currency started the week hovering around 1.15 against the dollar on growing concerns about the U.S. economic recovery.

Moreover, the dollar was pressured by news that the geopolitical advisory group Medley Global Advisors will shortly issue a negative report on the U.S. dollar.

Comments from Swedish economic cooperation minister Gunnar Lund also weighed on the greenback. Gunnar mentioned that the dollar's depreciation had not yet caused major problems for
European economies but an extended dollar slide with Asian currencies still pegged to it, could make it 'worrisome'.

As the week advanced, the euro jumped above $1.17 levels, helped by good economic data from the euro zone. The euro zone manufacturing purchasing mangers' index for September rose to 50.1, above the key 50-mark for the second time in a year.

Meanwhile, the U.S. Institute for Supply Management reported its index of manufacturing activity fell to 53.7 in September from 54.7 in August, against consensus expectations for a light rise to 55.

The dollar had a little impact to a raft of U.S. Federal Reserve speakers who downplayed worries about the sustainability of the United States' economic recovery. Chicago Federal Reserve President Michael Moskow said solid demand would eventually lead to an employment pickup, while Philadelphia Federal Reserve President Anthony Santomero noted that the U.S. economy is gathering steam.

On the last trading day, dollar trimmed its early losses after a surprisingly robust U.S. employment report for September. The monthly jobs report indicated that non-farm payroll jobs rose 57,000, outstripping economists consensus forecasts for a loss of 30,000, while the jobless rate remained at 6.1, compared with economists' anticipations for an increase to 6.2 pct.

The data gave glimmers of improvements in the U.S. job market, which raised hope of U.S. economic recovery. In the week ahead continued concerns over the U.S. economic recovery will pull the market's attention to the U.S. trade data, While German jobless figures will also be closely watched.

Range for the week: $1.1500 - $1.2000

Japanese Yen

The yen remained firm at the beginning of the week, edging towards the previous week's three-year highs against the dollar, on hopes of an
economic recovery in Japan, coupled with no action from the Japanese authorities to weaken the currency.

Japan's top financial diplomat, Zembei Mizoguchi, declined to comment on whether Japanese officials had intervened to stem the yen's rise after it slipped below 110.70 yen.

Meanwhile, Japanese employment report showed that the country's jobless rate fell to 5.1 pct in August from 5.3 pct in the previous month, which indicated signs of a Japanese economic recovery.

Mid week, the Japanese currency received a double boost from the Bank of Japan's closely watched 'tankan' business survey, which landed
within market's expectations.

However, the yen reversed some of its gains after Japanese Ministry of Finance official said that the MoF had intervened together with the U.S. Federal Reserve. The move gave a sign that the U.S. authorities were giving a tacit approval of Japan's intervention and tempered yen bullishness somewhat.

Vice Finance Minister for International Affairs Zembei Mizoguchi said that the intervention was aimed at correcting an overshooting in the yen exchange rate. Japan conducted a record 13.5 trillion yen of yen-selling intervention in the first nine months of this year, leaving about 12 trillion yen or so under the current ceiling.

Meanwhile, USD/JPY hardly reacted to remarks by Economics Minister Heizo Takenaka who said that yen strength would not have a major impact in the next 6 to 12 months from a macroeconomic standpoint.

He also added that upbeat economic data, such as 'tankan' business survey, must be discounted by taking into consideration the recent surge in the currency.

Next week the market will focus on Japanese machinery orders data and the Bank of Japan's monetary policy board meeting, which is widely
expected to leave monetary policy unchanged.

Range for the week: 108.00 -113.00

Sterling

Sterling tumbled against the dollar at the start of the week on lacklustre UK consumer data and worries a tough political party conference may
undermine Prime Minister Tony Blair's leadership.

Research company Martin Hamblin GFK's consumer confidence barometer held at -3 for the second month running, below expectations of a -2 reading.

Meanwhile, Blair faced angry protests from anti-war members of his ruling Labour party at the toughest party conference of his leadership, which comes as Labour suffers from its worst poll rating since Blair became leader in 1994.

Close to the weekend the pound surged against the dollar and the euro, on upbeat UK economic data. This raised speculation that Bank of England might hike interest rates before the European Central Bank and the U.S. Federal Reserve.

The CIPS/Reuters index of service sector activity increased to 58.7 in September from 57.0 in August, its fastest pace since April 2000. Meanwhile, Mortgage lender Halifax said Britain's house prices grew at 1.5 pct in September, the fastest pace since May.

Market focus will be on the Bank of England's Monetary Policy meeting scheduled for next week, with expectations that BoE might raise interest
rates from its current 48-year lows of 3.5 pct.

Range for the week: $ 1.6400 - $ 1.6900.