FOREX-Dollar on track for best week since 1992
* U.S. unemployment rate steady though employers shed jobs
* Euro set for biggest weekly loss vs dlr in its lifetime
* U.S. House vote on rescue plan awaited (Recasts, updates prices)
NEW YORK, Oct 3-The dollar remained on track for its best weekly gain against a basket of currencies in 16 years on Friday, after a report showed the U.S. unemployment rate remained steady in September even while employers shed jobs.
U.S. employers cut payrolls at the steepest rate in 5-1/2 years last month, according to a Labor Department report, slashing an unexpectedly large 159,000 nonfarm jobs as employment contracted for a ninth straight month.
But foreign exchange investors focused on the unemployment rate, which was unchanged from August at 6.1 percent.
The report added to the optimism surrounding the dollar, which was already on track for its best weekly gain versus the euro in the single currency’s lifetime after the European Central Bank opened the door to interest rate cuts on Thursday.
“U.S. non-farm payrolls are slightly worse than expected, with a net revision to prior months … along with the unemployment rate holding steady, which somewhat mitigated the weakness,” said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
“The market is not showing any sign yet of abandoning the strong U.S. dollar theme of the week. I remain optimistic that we will get a TARP passage, ugly as it may be, and the market will embrace risk as an antidote to fear,” he added.
The U.S. House of Representatives was due on Friday to vote on the $700 billion Troubled Asset Relief Program, known as TARP, the bank bailout measure passed by the Senate earlier this week.
In early New York trade, the ICE Futures index .DXY, which gauges its performance against a basket of six major currencies, was little changed at 80.458 .DXY, after earlier touching a 13-month peak of 80.933.
The dollar index, up 4.069 percent this week, was on track for its best weekly gain since October 1992 at current prices, according to Reuters data.
The euro fell 0.1 percent on the day to $1.3807 <EUR=>, after plumbing a 13-month trough of around $1.3704 on Thursday. The single currency was on track for its worst weekly percentage loss since its inception in 1999, with a 4.9 percent loss in the last five sessions, according to Reuters data.
The dollar rose to a session high against the yen after a report showed that while the sluggish U.S. service sector barely grew in September, it was in line with expectations.
Dollar/yen was last up 0.7 percent at 106.06 yen <JPY=>, just below the session peak of 106.116.
Against the yen, the euro was up 0.7 at 146.42 yen <EURJPY=>, well above a more than two-year trough of around 144.03 yen <EURJPY=EBS> touched earlier in the session.
BIG WEEK
The dollar has surged this week as the international nature of the financial market crisis was highlighted by the rescue of some major European lenders, including the Belgian-Dutch financial services firm Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz)(FOR.AS: Quote, Profile, Research, Stock Buzz), this week.
“The U.S. authorities are extremely committed to solving this crisis. … Europe would never be able to some up with such a huge stimulus package as they are talking about in the U.S., and that puts the euro area at a very high risk,” Danske Bank senior currency strategist John Hydeskov said in London.
The deteriorating financial backdrop prompted the ECB, which left rates unchanged at 4.25 percent on Thursday, to open the door for its first rate cut in more than five years, with President Jean-Claude Trichet saying inflation risks have eased as financial market turbulence hit the euro zone. [ID:nL2205423]
“Trichet opened up for a rate cut, some would say that it’s a bit late, but they (ECB) needed some time to change the mood of the board,” Hydeskov said.
A squeeze in interbank lending, with banks reluctant to lend to each other given the climate of bank failures, is a major factor behind the dollar’s gains, analysts say.
Against that backdrop, a slew of data this week showing the U.S. economy has likely fallen into a full-blown recession has done little to take the wind out of the dollar’s rise, even as the Fed is seen likely to cut rates as well this month. (Additional reporting by Gertrude Chavez-Dreyfuss in New York and Veronica Brown in London; Editing by Leslie Adler)By Nick Olivari
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