FOREX-Dollar skids on dour US jobs data; euro hits 1-mo high

By Julie Haviv

NEW YORK (Reuters) – The dollar fell broadly Friday as weak jobs data added to evidence of a marked slowdown in the U.S. economic recovery, while the euro hit a one-month high on optimism that Greece will receive its next aid payment and avoid restructuring its debt.

The greenback tumbled to an all-time low against the safe-haven Swiss franc and hit a one-month trough against the yen. While the greenback remains vulnerable to cheapening on economic weakness, the euro took out a key resistance level that could result in further gains.

The single currency surged to a one-month high against the U.S. dollar after the European Union, European Central Bank and International Monetary Fund said the next tranche of international aid for Greece should be available in July.

The euro rose as high as $1.46069 on trading platform EBS. It was last trading at $1.46050, up 0.8 percent on the day.

The rise above $1.45690 was the 61.8 percent Fibonacci retracement of last month’s decline from $1.49404 to $1.39680. Traders said the breach of that level was a bullish signal and suggests the euro could rack up further gains to $1.49.

The slowing U.S. economy has complicated the contentious issue of the U.S. debt ceiling and the need for fiscal tightening, Lena Komileva, senior vice president, global head of G10 strategy at Brown Brothers Harriman in London, said in a report.

“While there is no question about the market’s desire to fund the U.S. fiscal gap, especially as a slowing recovery shifts investors’ focus back to capital markets and increases demand for U.S. Treasuries, a worsening outlook for U.S. public finances will further dent the dollar’s relative advantage as a safe-haven major,” she said.

U.S. employers hired far fewer workers than expected in May and the jobless rate rose to 9.1 percent. Nonfarm payrolls increased 54,000 last month, the weakest reading since September, the Labor Department said on Friday.

“The headline surprise, compounded by downward revisions and an unexpected rise in the unemployment rate, contributed to a growing list of negative data reflecting a definitive soft patch in the U.S. economic recovery,” said Michael Woolfolk, managing director at BNY Mellon Global Markets in New York.

“The greater surprise is not the U.S. slowdown was unexpected, but rather that it was so pervasive — reflected in housing, labor, manufacturing and consumer spending data,” he added.

The U.S. service sector saw an acceleration in growth in May, according to a private survey. The data, however, did not sway dollar sentiment.

The dollar tumbled to its lowest level on record against the safe-haven Swiss franc, falling to 0.8331 franc. It last traded at 0.8358, down 0.8 percent.

Against the yen, the dollar fell to a one-month low of 80.03. It last traded at 80.34, down 0.7 percent. The dollar/yen dropped along with U.S. Treasury yields.

The Federal Reserve, which injected trillions of dollars into the U.S. economy to support the recovery, will be highly reluctant to embark on more asset purchases through a third round of quantitative easing, called QE3. Quantitative easing is seen as negative for the U.S. dollar as it is tantamount to printing cash.

“While this may have persuaded (Federal Reserve Chairman Ben) Bernanke and company to pursue QE3 six months ago, today is a different story given the pace of inflation,” Woolfolk said.

Concerns over U.S. debt and a weak U.S. economy are likely to keep the dollar weak, though the euro may also be hampered by euro zone debt concerns.

The dollar was down 0.8 percent against a basket of major currencies at 73.764.