Currency trading was choppy
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-The dollar extended its rally against the euro Friday morning in New York as renewed concern over sovereign debt problems in Europe overshadowed a mixed U.S. employment report.
- Source: Yahoo
Currency trading was choppy, with the euro briefly erasing most of its overnight losses before trading back around the $1.37 level, as investor digested the report showing the U.S. economy continued to shed jobs while the unemployment rate unexpectedly dropped in January.
“It’s a mixed report,” said Carl Forcheski, director of foreign exchange at Societe Generale in New York. “It’s showing some repair, but there’s certainly a lot of work to be done.”
Because of the mixed nature of the report, currency markets have been unsure of how to trade the data, Forcheski said.
It’s not unusual for currencies to fluctuate wildly in the immediate aftermath of closely watched data such as the monthly U.S. employment report. The knee-jerk reactions as investors make initial adjustment to positions don’t always reflect the trend which later becomes dominant.
But, after traders digest the report, “there’s no question that issues in the euro zone will remain,” referring to the sovereign debt problems in Greece, Portugal and possibly Spain.
“The sovereign risk questions in Europe will begin to reassert themselves,” he said. “The euro will remain on the defensive.”
Friday morning in New York, the euro was at $1.3690 from $1.3741 late Thursday, according to EBS via CQG. The dollar was at 89.55 yen from Y88.94, while the euro was at Y122.57 from Y122.20. The U.K. pound was at $1.5673 from $1.5750. The dollar was at CHF1.0730 from CHF1.0655.
The Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.201 from 79.907. The index also traded near seven-month highs.
Demand for safer assets had picked up during Asian and European trading hours on the back of renewed concern over sovereign debt problems in the euro zone, forcing the Swiss National Bank to intervene to stem a spike in the Swiss franc against the euro, according to traders.
The Swiss franc fell to multi-month lows against the euro and dollar in Asia Friday as market participants said Switzerland’s central bank made a rare and aggressive intervention to curb the rise in its currency.
The euro spiked around 0300 GMT to CHF1.4905, its highest since Dec. 28, from CHF1.4635. The dollar jumped to CHF1.0800, its highest since Aug. 18, from CHF1.0670.
Two dealers in the region said they saw franc-selling orders under the name of the SNB on the EBS trading platform. The central bank was bidding for euros at CHF1.49, far above the spot rate of CHF1.46, they said. The Swiss central bank didn’t confirm the intervention.
Meanwhile, the cost of insuring Greek and Portuguese debt against default remained at record wide levels Friday. According to CMA DataVision, Greece’s five-year sovereign credit-default swap spreads–a key measure of credit risk–stood at 446 basis points in early European trading Friday, up around 19 basis points from Thursday’s record wide close of 427 basis points.
Investors are focused on a key vote in Portugal Friday. Portuguese lawmakers may vote for a regional finance law that could add to the budget deficit at a time when investors are growing increasingly concerned about the state of Portuguese finances.
The proposed Law of Regional Finances was approved Thursday by a parliamentary committee and would increase the funds sent to Portugal’s Madeira and Azores regions by EUR50 million this year, and raise the amount each year until 2013 when the figure would hit EUR86 million, according to Finance Ministry calculations.
Jitters over the fiscal health of weaker members in the euro zone pushed the dollar index to its highest level since July 2009, while the euro sank to as low as $1.3648, a fresh eight-month low.
The euro is under increasing pressure over sovereign debt issues in Greece and other euro zone countries and “when you’ve got [anti-euro] momentum of this kind of scale, you need something to reverse it,” said Daragh Maher, deputy head of global foreign exchange strategy at Calyon in London. The payrolls data didn’t provide the impetus to stop the momentum, he said.
The U.S. unemployment rate, calculated using a household survey, fell to 9.7% last month from an unrevised 10% in December, the Labor Department said Friday. Economists surveyed by Dow Jones Newswires had forecast the jobless rate would edge higher to 10.1%.
Nonfarm payrolls fell by 20,000 compared with a revised 150,000 decline in December. Economists had expected payrolls to be flat. The December figure was revised down sharply from an originally reported 85,000 drop.
Canada Morning
The Canadian dollar is higher after a volatile Friday morning that saw it rallying on positive domestic jobs data for January, surrendering some of its gains and then rallying again along with the euro after U.S. jobs data were released.
The U.S. dollar is trading at C$1.0684 from C$1.0729 late Thursday.
The U.S. dollar dropped in earlier trading after Statistics Canada reported in earlier trading that the Canadian economy created 43,000 jobs, substantially exceeding the expected 15,000.
While the greenback recovered partially, it then headed lower again after the release of U.S. jobs data, a move that traders linked to the U.S. unit’s simultaneous decline against the euro.
A rebound in U.S. equities futures after the U.S. data encouraged market players to take profit on earlier risk aversion trades, said George Davis, chief technical analyst for foreign exchange at RBC Capital Markets in Toronto.
Strength in stocks could drive some further short-term weakness in the U.S. dollar, but the market remains nervous overall and could use a U.S. dollar retreat as a buying opportunity, he said.
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