CURRENCIES: Dollar Dips Vs. Yen, Up Vs. Euro On U.S. Jobs Data

By William L. Watts A report showing U.S. joblessness jumped to 10.2% in October pressured the U.S. dollar against the yen, but lifted it against the euro Friday, as investors scrambled into the safe haven of the low-yielding U.S. and Japanese units. The dollar slumped to 90.11 yen compared with 90.73 in late North American trade Thursday. But the U.S. currency rose against the euro, which fell to $1.4863 from $1.4874. The dollar index (DXY), a measure of the greenback against a trade-weighted basket of rival currencies, stood at 75.722, down fractionally on the day. The U.S. economy shed 190,000 jobs last month, lifting the unemployment rate above 10% for the first time in 26 years, the Labor Department said. The report also revised statistics for September and August. Economists surveyed by MarketWatch, were looking for a decline in nonfarm payrolls of 150,000 and for the unemployment rate to rise to 9.9%. Stocks opened lower but reversed higher in midmorning trading. Bets the Federal Reserve will eventually lift interest rates from near 0% fell slightly after the report. Fed fund futures indicated traders pared bets the Fed would raise its target rate by mid-2010 to 0.31%, compared to a 0.33% rate before the data. On Wednesday, the Fed left its target rate in a range of between 0% and 0.25%, and repeated its commitment to keep rates low for the foreseeable future, citing slack in the economy and little reason to worry about inflation. The exceptionally low rates have fueled a dollar carry trade, whereby investors borrow dollars to invest in riskier assets, such as stocks and commodities. This has led the dollar to fall when investors embrace risk, and to rise when they seek a safe haven. According to Lloyds TSB, even the disappointing U.S. jobs report will be enough to tame risk taking. "We are not convinced that ... [nonfarm payrolls data] will cause a major reversal of the pro-risk skew only two days after the Fed reiterated that interest rates will stay low for a prolonged period," said Kenneth Broux, market economist at Lloyds TSB. The British pound was trading at $1.6572, down slightly from $1.6581. Also Friday, the Australian dollar bought 91.62 U.S. cents, up 0.7%. Australia's central bank raised its inflation and economic-growth forecasts overnight and hinted at more interest-rate tightening ahead. On Thursday, the dollar fell against the yen while gaining on the euro, with traders playing off the European Central Bank's decision to leave euro-zone interest rates unchanged as well as the Bank of England's move to boost the size of its quantitative-easing program.