The US dollar advanced on Friday, regaining some of the ground it lost on Thursday after getting a boost from a surprisingly small decline in last month's payrolls.
US nonfarm payrolls fell 35,000 last month, far short of the 175,000 drop expected by economists in the wake of Hurricane Katrina. Additionally, August payrolls were revised sharply higher, to 211,000 from the 169,000 originally reported.
The data, while generally seen as a good sign for the US economy, was received cautiously in markets, since many economists are expecting a bigger fall in payrolls due to the hurricane to materialize this month.
In late New York trading on Friday, the euro was at US$1.2123, down from US$1.2140 before the data and US$1.2183 late Thursday.
The US dollar was at ?113.78, up from ?113.24, and at 1.2782 Swiss francs from SF1.2705. The pound was at US$1.7640 from US$1.7784, while the euro was at ?137.94 from ?137.96.
Currency trading wound down early on Friday, as bond markets closed early at 2pm ahead of tomorrow's Columbus Day holiday, when bond markets will be closed but US stock markets will remain open.
The dollar rose following the jobs report, rebounding partially from the heavy losses it had sustained versus the euro Thursday in the wake of hawkish comments from European Central Bank (ECB) policy-makers. European Central Bank President Jean-Claude Trichet said on Thursday that the ECB is "strongly vigilant" on inflation prospects, and implied the central bank stands ready to raise rates if the need arises.
The dollar's retreat on Thursday had also been seen as something of a correction, as traders pared back their dollar heavy positions following the US currency's ascent to multi-month highs earlier in the week.
Analysts said that the data came as a surprise to a market that had been looking for a far weaker number.
However, the market's mild reaction to the employment data reflects a bit of caution on the part of traders.
"Because of the volatility and disparate movements in the market going into this number, we figured we were going to see a muted reaction," said T.J. Marta, senior currency analyst at RBC Capital Markets in New York.
Analysts also suggest that with the payrolls survey period having ended Sept. 12, there were still many workers on actual payrolls who didn't continue working and are now out of a job.
"The rise in jobless claims since the storm does suggest a bigger loss of jobs indicated here ... This might just mean that the Katrina effect will be spread across more than one month," said Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla, New York.
With little indication from the Labor Department to help clarify the effects of Katrina, "you can read these numbers however you want," Shepherdson said.
That may mean that the dollar, which hit its best level versus the euro in two months on Tuesday and its highest level versus the yen since mid-2004 on Wednesday, may not yet have a green light for a further rally.
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