NEW YORK CITY: The dollar scored solid gains against the euro after a surprisingly strong jobs growth report stirred expectations the Federal Reserve could begin to reduce its huge monetary stimulus soon.
The euro fell to $1.3368 around 2200 GMT, down from $1.3414 at the same time on Thursday.
The dollar jumped to 99.04 yen from 98.02 yen. The euro also was stronger against the Japanese currency, rising to 132.40 yen from 131.50 yen.
Investors bought dollars aggressively on the back of the payrolls report, said Kathy Lien of BK Asset Management.
The Labor Department said the US economy added 204,000 jobs in October, double what analysts forecast, and revisions to the previous two months added another 60,000 jobs
The upbeat jobs growth, despite a 16-day partial federal government shutdown, suggested the world’s largest economy could be in better shape than previously believed, and could encourage the Federal Reserve to decide to reduce its asset-purchase program, or quantitative easing (QE), by the end of the year.
Markets are taking the news as a sign that the Federal Reserve will begin to taper QE3 sooner than later perhaps December given labour conditions bucking expectations, said Christopher Vecchio, a currency analyst at DailyFX.
For Lien, the jobs report extended a string of positive economic surprises that could give Fed policy-makers the confidence to reduce stimulus before March.
The bottom line is that if the government shutdown did not happen, the unemployment rate could be at seven percent and with the anticipated snap back in government jobs in November, labour market conditions are strong enough for December tapering to be a serious option for the Fed, she said.
The euro’s sharp fall against the dollar came amid mixed eurozone data and the downgrade of France’s credit by ratings firm S&P to AA from AA+.
Adding to the pressure was the European Central Bank’s interest rate cut on Thursday, taking its key rate to a new all-time low of 0.25 percent after holding it unchanged at 0.5 percent since May.
AFP
