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Greenback advances broadly against rivals

The US dollar advanced broadly on Friday to reach a fresh 18-month high versus the euro and a 26-month top versus the yen despite disappointing data on US employment.

The euro not only fell below what had been its nadir for this year at US$1.1868, but continued as far as US$1.1801, its worst level since last May. Against the yen, the dollar reached a new 26-month high above ¥118.

The dollar also hit an 18-month high versus the Swiss franc and a one-year peak against the Australian dollar. After three years of declines, the US dollar has now lifted 15 percent this year against the yen, while the euro has dropped 13 percent against its US counterpart.

Rising US interest rates have supported the dollar in recent months and even the worse-than-expected jobs report for last month couldn't diminish the greenback's allure.

Higher rates in the US make dollar-denominated assets more attractive to investors from abroad.

The US dollar has also been supported by indications of economic strength, and reduced expectations for interest rate hikes from the European Central Bank.

Late afternoon, the euro was at US$1.1823 from US$1.2044 late Thursday, according to EBS.

The dollar was at ¥118.27 from ¥117.12.

Against the Swiss franc, the US dollar was at SF1.3061 from SF1.2924.

The pound was at US$1.7505 from US$1.7702, and the euro was at ¥139.70 from ¥140.47.

With traders headlong in heavy dollar positions, the US currency slipped back briefly following Friday's jobs data. US payroll employment increased by 56,000 jobs after an upwardly revised 8,000-job decrease in September, the US Labor Department said on Friday. However, that was far below the 124,000 forecast increase while the August payrolls growth was revised sharply lower.

The unemployment rate slipped to 5.0 percent last month from September's 5.1 percent.

Trading was choppy following the data with the euro initially gaining, but falling back to pre-data levels and then declining sharply.

Market watchers said that the initial selling was merely a flush of over-extended dollar positions, and with that out of the way, the coast was clear for the dollar to post new highs.

Charles Shioleno, currency strategist at Lehman Brothers in New York, said that with the Fed still raising rates and sounding hawkish and the European Central Bank (ECB) disappointing euro bulls Thursday by not stepping up its rate hike rhetoric, investors had been determined to test the euro's low for this year.

The ECB on Thursday kept interest rates steady as expected, but disappointed many in the market who had been looking for officials to give a clear sign that they are ready to start raising rates soon.

Shioleno said that he had been "surprised" by how quickly the dollar rebounded from a disappointing payrolls report but after a "pretty strong ISM (Institute for Supply Management) report, the Fed meeting and the ECB ... there's a pretty strong sense in the market that this move could go on for a while."

Shioleno said that euro buying around the US$1.1930 mark had been a key constraint on dollar gains in recent weeks, but that Friday's break below that figure seemed to eliminate that barrier for now.

With the euro under its low of last May low, technical analysts say the single currency is now targeting the US$1.1797 low it hit last April, and a move below that level would take it to its lowest level since November 2003.
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