FOREX-Dollar falls vs euro, higher-yielding currencies

* Risk appetite increases; yen, Swiss franc under pressure

* U.S. payrolls fall less than expected in August

* U.S. service sector activity growth slows in August
(Updates prices, adds quotes, details, changes byline)

By Aleksandra Michalska

NEW YORK, Sept 3 (BestGrowthStock) – The U.S. dollar fell against
most foreign currencies on Friday after a surprisingly strong
non-farm payroll report eased worries about the economy and
boosted the appetite for riskier assets.

The safe-haven yen and Swiss franc weakened broadly, while
higher-yielding currencies such as the Australian dollar gained
as expectations grew that the health of the U.S. labor market
may not be as poor as many had feared.

U.S. non-farm payrolls fell by 54,000 in August, the Labor
Department said, well below expectations for a decline of
100,000. And private employment, considered a better gauge of
labor market health, increased more than had been forecast. For
details, see [ID:nN02227856]

“Today’s employment number was encouraging,” said Kevin
Chau, FX strategist at IDEAglobal in New York. “But I think the
market is still looking for more signs that we are not heading
towards double dip.”

Optimism about the economy, however, faded slightly after
separate data showed the U.S. non-manufacturing sector grew
more slowly than expected in August and the sector’s employment
shrank.

The ICE Futures U.S. dollar index (Read more about the global trade. ) (.DXY: ), which tracks the
greenback versus a basket of six currencies, last fell 0.5
percent to 82.052.

Stephen Butler, director of forex trading at Scotia Capital
in Toronto, expects further dollar weakness in the near term as
risk appetite stays supported.

The euro traded at $1.2884 (EUR=: ), up 0.5 percent. Against
the yen, it gained 0.6 percent to 108.69 yen (EURJPY=: ).

While the jobs report may mitigate fears of a double-dip
recession, some analysts cautioned that the U.S. economy is
still in for a slow recovery.

“Just as trading on the bad U.S. data recently was
overdone, I think sentiment on this week’s positive reports is
also going to be overdone,” said Fabian Eliasson, vice
president of currency sales at Mizuho Corporate Bank in New
York. “You have a lot of people unemployed, so it’s a long way
back to normal.”

The dollar earlier rallied more than 1 percent against the
yen to a session high of 85.22 yen after the jobs data (JPY=: ),
according to Reuters data. It pared most gains after the
weaker-than-expected services data from the Institute for
Supply Management, and last traded up 0.2 percent at 84.42
yen.

The dollar hit a 15-year low of 83.58 yen on electronic
trading platform EBS late last month on fears the U.S. economic
recovery was stalling.

IDEAglobal’s Chau said the dollar/yen may still try to dip
below 80 and traders will likely continue to pay close
attention to the risk of currency intervention by Japanese
authorities to weaken the yen.

The euro rose to 0.9 percent against the Swiss franc
(EURCHF=: ) to 1.3114 francs, off from an all-time low around
1.2850 earlier this week. The dollar was up 0.4 percent at
1.0170 francs (CHF=: ).

The increase in risk appetite lifted commodity currencies.
The Australian dollar hit about four-week highs against the
dollar to US$0.9175 (AUD=: ), while the New Zealand dollar rose
to a more than three-week high at US$0.7218 (NZD=: ). The
Canadian dollar advanced to a two-week high, with the greenback
falling 1.3 percent to last trade C$1.0399 (CAD=: ).
(Additional reporting by Nick Olivari and Steven C. Johnson;
Editing by Leslie Adler)

FOREX-Dollar falls vs euro, higher-yielding currencies