Currencies

[thepennyking]

Dollar Rises on Strong U.S. Jobs Report

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By Kazunori Takada

TOKYO (Reuters) - The dollar traded higher against its major rivals on Monday, after a bullish U.S. jobs report raised expectations that the Federal Reserve would move sooner to lift rates from a 46-year low.

Although the U.S. currency initially struggled against the yen on selling by Japanese exporters and as steep gains in Tokyo share prices fueled demand for the yen from foreign investors, it was fetching 104.64/72 yen as of 0552 GMT.

That compares with 104.46/54 in late U.S. trade on Friday.

"Now that (dollar) selling has receded, it's coming back up on short-covering as the market was short (on dollars) going into the jobs data on Friday," said a spot trader at a U.S. bank.

Data on Friday showed that U.S. non-farm payrolls climbed 308,000 in March, the biggest gain in four years and more than twice what the market was expecting.

An improvement in jobs data is seen key to the Fed raising its funds rate from a 1958 low of one percent, which would increase the allure of dollar-denominated assets for foreign investors.

The euro rowed back to $1.2097/02 from $1.2132/38, edging closer to a four-month low of 1.2045 hit late last month.

Sterling slipped to $1.8272/76 compared with 1.8302/07.

"The euro is reacting to (strong U.S.) fundamentals. I think there is a chance that we could see the euro fall under 1.2," said Mitsuo Imaizumi, deputy general manager of the international bond and forex department at Daiwa Securities SMBC.

UPBEAT JAPAN

Against the yen, the single currency was trading a tad lower at 126.53/64 yen compared with 126.60/74 in late U.S. trade.

"What we may see is that the yen will continue to outperform the euro, because there has been a fairly large euro rally to date and we haven't seen that in the yen due to intervention," said Naomi Fink, senior currency strategist at BNP Paribas.

"And secondly because we see some pretty strong economic figures and improvements in sentiment in Japan, whereas we don't really in the euro area."

Hans-Werner Sinn, head of Germany's Ifo Institute, said on Sunday that the euro zone's biggest economy was mired in an economic crisis, with high wages, foreign competition and a political logjam making him doubtful of near-term improvements.

Meanwhile, Japan's closely watched Tankan survey of business sentiment, released last week, showed that Japanese companies felt business was better in March than at any time in almost seven years.

Analysts say that given improving economic fundamentals, large foreign buying of Japanese stocks, and the Japanese authorities apparent scaling back of currency intervention, the yen is likely to make further gains.

A Japanese government source, who has regular contact with the Finance Ministry, which runs Tokyo's intervention policy, told Reuters his impression was that many in the government recognized that a stronger yen helped companies deal with high oil and raw material prices.

He said that as a result, the government would likely halt its campaign of massive intervention to weaken the yen.

The dollar was still not far from the four-year low of 103.40 yen hit on Wednesday.

The Nikkei average ended the day up 1.20 percent at 11,958.32, after briefly leaping above the key 12,000 mark to a high of 12,003.92.

But some traders said the yen's upside versus the dollar may be limited.

"Yen-buying was limited despite the Nikkei's move today and the dollar was also little moved on the Reuters report on intervention. All this may be a sign that the yen may be capped around here for the time being," said the U.S. bank dealer.