The dollar fell against most major counterparts after U.S. employers added more jobs than forecast in July even as the unemployment rate rose to a five-month high.
The U.S. currency slid as stocks gained amid continued speculation the Federal Reserve will start a third round of asset purchases to spur the economy. The euro erased a weekly loss versus the dollar after German lawmakers signaled they’ll support the European Central Bank’s plan to buy government bonds to curb the region’s debt crisis. South Africa’s rand was the biggest winner among major currencies as risk appetite swelled.
“You got in the sweet spot for risk because while you had an upside surprise on the headline numbers, you still have the possibility of QE3 because the unemployment rate went up as well,” said Samarjit Shankar, a managing director for the foreign-exchange group in Boston at Bank of New York Mellon. “These forays into risk are very fickle, so one swallow does not a summer make and Monday could be a very different day.”
The dollar dropped 1.6 percent to $1.2377 per euro at 4:27 p.m. New York time. It touched $1.2392, and lost 0.5 percent on the week. The U.S. currency appreciated 0.4 percent to 78.57 yen, rising for the first week since June. Japan’s currency tumbled as much as 2.2 percent versus the euro, the most since June 29, to 97.40 before trading at 97.25.
The euro stayed below the high that it reached yesterday versus the dollar, $1.2405, before ECB President Mario Draghi failed to reassure investors that policy makers were ready to take immediate steps to curb European fiscal turmoil. The single currency, stocks and commodities slid as he spoke to reporters after an ECB meeting in Frankfurt.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 1.2 percent.
The greenback lost 0.6 percent in the past week versus nine developed-nation counterparts tracked by the Bloomberg Correlation-Weighted Indexes. The euro weakened 0.1 percent, while Sweden’s krona was the best performer, rising 1.9 percent.
U.S. payrolls added 163,000 jobs following a revised 64,000 rise in June that was less than initially reported, Labor Department figures showed in Washington. The median estimate of 89 economists surveyed by Bloomberg News called for a gain of 100,000. Unemployment rose to 8.3 percent, from 8.2 percent.
The Federal Open Market Committee said Aug. 1 after a policy meeting it “will provide additional accommodation as needed” to spur growth and employment, while it refrained from expanding monetary easing this month. The central bank bought $2.3 trillion of assets in two rounds of the stimulus strategy called quantitative easing between December 2008 and June 2011.
“The headline reading was good, but the supporting details not so good, so we have a little support for risk sentiment but not a game changer,” said Greg Anderson, North American head of Group-of-10 currency strategy at Citigroup Inc. in New York. “The door is left open to easing, and now on the horizon it’s back to what will Europe do about Spain, Italy and Greece.”
The Standard & Poor’s 500 Index rallied 1.9 percent, rising for the first day this week. U.S. Treasuries fell, pushing the yield on the 10-year note up nine basis points, or 0.09 percentage point, to 1.57 percent.
Canada’s dollar rose to parity against the greenback for the first time since May, gaining for a fourth straight week. The Canadian currency, nicknamed the loonie, appreciated 0.6 percent to C$1.0014 per U.S. dollar and touched 99.80 cents, its strongest level since May 11. The currencies last traded on a one-for-one basis on May 15.
South Africa’s rand surged 2.3 percent to 8.1568.
New Zealand’s dollar, nicknamed the kiwi, rose to a euro-era record versus the shared currency for the third consecutive day after S&P affirmed the nation’s credit rating. The company cited the country’s fiscal flexibility, resilient economy and policy institutions.
The kiwi gained 0.5 percent to NZ$1.4967 per euro before trading at NZ$1.5118. The South Pacific currency strengthened
1.1 percent to 81.87 U.S. cents and touched 81.99 cents, the highest since April 30.
Gains in higher-yielding assets may be short-lived if the strength of the payrolls data diminishes odds of further measures for quantitative easing from the Fed, said Shaun Osborne at Toronto-Dominion Bank.
Japan’s yen fell against all of its 16 most-traded counterparts. The Japanese currency declined against the dollar for the first week since June 22, losing 0.2 percent.
ECB officials are working on a plan to buy bonds to combat the region’s mounting sovereign borrowing costs, and details will be released in coming weeks, Draghi said yesterday. The bank kept its key interest rate at a record low 0.75 percent.
“People are increasingly looking past the last week of Draghi and the ECB toward more fundamentally what the ECB is going to do that’s new,” Dan Dorrow, head of research in Stamford, Connecticut, at Faros Trading LLC, said in a telephone interview. “The fundamental that the market is latching onto now is that total political support for the European debt relief effort.”
Spanish Prime Minister Mariano Rajoy said he would consider asking Europe’s bailout funds to buy Spanish debt if it were for the best for the country, as he called for a crisis meeting of the region’s finance chiefs. He spoke at a news conference in Madrid. Yields on Spain’s 10-year notes climbed to 7.44 percent today, almost a euro-era high, before declining to 6.85 percent.