Currencies

[thepennyking]

Dollar Firmer as Jobs Hopes Fly High
Friday April 2, 4:50 am ET
By Natsuko Waki


LONDON (Reuters) - The dollar recovered its footing on Friday, pulling up from recent four-year lows against the yen and 10-day lows against the euro ahead of a keenly-awaited U.S. employment report.
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Monthly U.S. jobs figures have disappointed in recent months, each time sending the dollar reeling, but a strong employment index in Thursday's ISM manufacturing report has raised optimism Friday's payrolls could show an improvement.

Economists polled by Reuters predicted 103,000 jobs were created in March compared with a paltry 21,000 in February. However, some banks expect a payrolls gain of as much as 200,000 and others as low as 75,000.

"Expectations for the payrolls are flying quite high at the moment. But room for disappointment is also considerable," said Carsten Fritsch, currency strategist at Commerzbank in Frankfurt.

"The dollar will come under pressure if the number comes in weaker than expected as it will postpone expectations for a Federal Reserve tightening and also put the sustainability of U.S. expansion at risk."

By 0930 GMT, the dollar was up two thirds of a percent at 104.18 yen, after hitting a four-year low of 105.38 on Wednesday. The euro also succumbed to the dollar's firmer tone, shedding a third of a percent to $1.2316.

"I think the real consensus now will have shifted somewhere between 120 and 150 (thousand) or even above... The bottom line here is there seems to be an asymmetric risk to the dollar today," said Mitul Kotecha, head of global FX research at Credit Agricole Indosuez.

Job creation has been the weak spot in the U.S. economic recovery and investors believe the Fed is unlikely to raise interest rates until the employment market has perked up. Low rates of return on dollar deposits have played a key role in the dollar's recent downtrend as investors have sought higher- yielding assets elsewhere.

YEN LOSES STEAM

The yen paused on Friday after sharp gains earlier in the week, prompting speculation Japanese investors were buying foreign assets at the start of the fiscal year. But many analysts said it was just a matter of time before Japan's currency made further gains.

"The yen is just pausing for breath," said David Mann, currency strategist at Standard Chartered. "We still see it going higher in the coming months."

Given improving economic fundamentals, large foreign buying of Japanese stocks, and the Japanese authorities apparent scaling back of currency intervention, some analysts say the yen could soon challenge the 100 per dollar mark.

Japan's top financial diplomat, Zembei Mizoguchi, said on Friday that Tokyo's stance on foreign exchange was unchanged, and that it would continue to act as needed in the market.

The Nikkei average gained more than one percent, as foreign investors continued to pour capital into Japanese assets.

The latest data from the Finance Ministry on weekly capital flows shows net purchases of Japanese stocks by foreigners from March 1 to March 26 totaled 2.58 trillion yen ($24.88 billion), which would likely make the month of March a record.

In the euro zone, industry producer prices rose 0.1 percent on the month and were unchanged on the year in February.

The single currency received a boost on Thursday after European Central Bank President Jean-Claude Trichet indicated the bank was in no hurry to cut rates, wrong-footing many traders who had expected him to signal a rate cut in coming months.