Sun, Mar 07, 2004 - Page 10 News List

Greenback takes a pummeling as euro surges 2 percent


The euro surged 2 percent against the dollar here Friday following publication of a US job creation figure for last month that was far below market expectations and deeply disappointing to investors.

The single currency in late-day trading was at US$1.2403, against US$1.2197 late Thursday in new York.

The euro jumped to US$1.2424 from US$1.2185 within minutes of news from Washington that the US economy created a mere 21,000 jobs in February rather than the 126,000 expected by analysts.

Had the anticipated figure been met, analysts said, it would have been seen as heralding a move by the US Federal Reserve to raise interest rates, thereby slowing the appreciation of the euro.

Against the yen the dollar rose to ¥111.44 from ¥111.08 on Thursday.

"With markets reacting more to poor data than strong data, the dollar got pummelled in the wake of these numbers," said Adam Cole, senior forex strategist strategist at Credit Agricole Indosuez.

Propsects for a strong jobs report had helped the dollar post sharp gains over the last few days.

Starting the week at around the US$1.2540 mark, the euro dropped to a low of US$1.2060 on Wednesday.

Analysts said Friday's disc-ouraging news could herald a renewed period of dollar weakness, with the euro poised to test its all-time high of over US$1.29 once again to the likely discomfort of European officials.

"As of Monday, the markets will start testing the euro's upside and the European Central Bank's pain threshold," said Neil Mackinnon, chief economist at ECU Group.

Once the US$1.25 is breached, Mackinnon said he expected ECB officials to try to "talk down" the euro to prevent any further appreciation that could nip any eurozone recovery in the bud.

Prior to the dollar's bounce-back over the past couple of weeks, ECB officials had voiced their concerns about the euro's ascent.

But Mackinnon said he doubted their concerns would have much impact and stressed that talk would have to be backed by action, with the ECB cutting its interest rates to reduce differentials with those in the US.

Friday's report also dampened any suggestion that the US Federal Reserve might raise its own rates any time soon.

The euro was changing hands at US$1.2403 from US$1.2197 late on Thursday in New York, ¥138.24 (¥135.54), £0.6728 (£0.6693) and 1.5781 Swiss francs (Sf1.5770).

The dollar stood at ¥111.44 (¥111.08) and 1.2721 Swiss francs (Sf1.2920).

The pound was at US$1.8432 (US$1.8231), ¥205.44 (¥202.44) and 2.3447 Swiss francs (Sf2.3542).

On the London Bullion Market, the price of an ounce of gold stood at US$399.25 against US$392 on Thursday afternoon.

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