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Dollar Falls Versus Most Peers on Payroll Growth; Euro Climbs

The dollar declined against a majority of its most-traded counterparts as U.S. employers added more jobs than forecast in July and the unemployment rate fell, damping demand for refuge.

The euro climbed versus the dollar as Italian Prime Minister Silvio Berlusconi said his nation will speed up its austerity measures, spurring speculation the European Central Bank will buy its bonds. The yen was up against the greenback a day after Japan moved to weaken it as stocks fluctuated amid concern the U.S. could still lose its top credit rating.

“Any kind of indication that growth is holding up, especially outside of Europe, will be very important going forward,” said Jens Nordvig, a managing director of currency research and head of Americas fixed-income research in New York at Nomura Holdings Inc. “We need to see more data of this nature in coming weeks to really stabilize sentiment.”

The dollar fell 1.3 percent to $1.4282 per euro at 5 p.m. in New York, cutting its gain for the week to 0.8 percent. It declined 0.6 percent to 78.40 yen after earlier gaining 0.7 percent. The greenback advanced 2.1 percent versus the Japanese currency for the week, the most since April 1. The euro rose 0.7 percent to 111.97 yen, from 111.16 yesterday.

U.S. payrolls rose by 117,000 workers after a 46,000 increase in June that was more than originally estimated, Labor Department data showed today in Washington. The median estimate in a Bloomberg News survey projected a gain of 85,000. The jobless rate dropped to 9.1 percent, from 9.2 percent.

‘Some Caution’

“This is a good number,” said Brian Taylor, chief currency trader at Manufacturers & Traders Trust Co. in Buffalo, New York. “There’s still going to be some caution just because even though the numbers are actually good and U.S.-positive, there’s still a global issue going on.”

The Standard & Poor’s 500 Index ended the day little changed after rising 1.5 percent and falling 2.7 percent. It plunged 4.8 percent yesterday.

“Stocks have been absolutely schizophrenic today, and the U.S. dollar has been moving basically in lock-step with that,” said John Doyle, a strategist in Washington at the currency-trading firm Tempus Consulting Inc.

Australia’s dollar fell versus most major peers as risk appetite ebbed and the nation’s central bank lowered its forecast for growth. The Aussie fell 0.8 percent to 81.87 yen and touched 81.42 yen, the lowest since March. It fell 0.2 percent to $1.0443.

More Proof Needed

While the employment data may provide a boost to U.S. markets, Federal Reserve policy makers, meeting Aug. 9, will likely need more proof the economy is strengthening before they alter their views on interest rates, Nomura’s Nordvig said.

Rate futures signaled traders are pushing back until 2013 expectations for when the Fed raises its target for overnight loans between banks. It has been zero to 0.25 percent since December 2008.

U.S. gross domestic product grew at a 1.3 percent pace in the second quarter, less than forecast, after almost stalling at the start of the year as consumers retrenched, government data showed on July 29. President Barack Obama signed a bill Aug. 2 that raised the nation’s debt ceiling and lowers federal spending, fueling concern budget cuts will weigh on the economy.

S&P placed the U.S. on “CreditWatch” on July 14, saying there was a 50 percent chance its AAA rating would be cut within 90 days even if an agreement were reached by the Aug. 2 debt-cap deadline. The company said it needs to see “a credible solution to the rising U.S. government debt

A spokesman for S&P, John Piecuch, said in an e-mail the company won’t comment on speculation the rating will be cut. Moody’s Investors Service and Fitch Ratings this week affirmed their AAA ratings on the U.S.

European Debt

European leaders hunted for solutions to the region’s debt crisis. A divided European Central Bank restarted a bond-purchase program yesterday after a four-month hiatus. It refused to extend the purchases to Italy and Spain, the two countries at the center of the current turmoil, sending yields on 10-year Italian debt to a euro-area record and keeping Spanish yields at almost a record.

The euro gained today versus most peers amid speculation “the ECB is now willing to buy the debt of Spain and Italy if the Italians make financial reforms,” said Joseph Trevisani, chief market analyst at FX Solutions Inc. in Saddle River, New Jersey. “It shows you how much concern there really was in the markets for financial contagion out of Europe,” he said.

Prime Minister Berlusconi said at a news conference in Rome that Italy will seek a balanced budget in 2013, a year earlier than planned.

Franc Record

The franc touched a record versus the dollar today even after the Swiss National Bank President Philipp Hildebrand said policy makers won’t exclude any measures to curb the currency’s advance. He spoke with Neue Zuercher Zeitung in an interview. The bank on Aug. 3 lowered its target for the three-month London interbank offered rate to “as close to zero as possible” to weaken the currency and protect Switzerland’s economy.

“Hildebrand has thrown down the gauntlet,” said Yra Harris, chief trader and analyst at Praxis Trading in Chicago. “Markets are going to push at him until he shows that they have a real plan for weakening the currency.”

The Swiss currency fell 0.5 percent against the dollar to 76.74 centimes after earlier reaching a record 75.79 centimes. It was down 1.8 percent to 1.0954 per euro, dropping from a record 1.0711 reached earlier.

The yen dropped yesterday and the franc gained after Japan sold its currency to stem its rise for the third time after six years of a hands-off approach that ended in September 2010.

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