Sun, Jan 08, 2006 - Page 10 News List

US dollar tumbles in wake of weak job-growth report


The US dollar slumped on Friday after a disappointing report on US job growth reinforced speculation about a halt in the cycle of US rate hikes, and comments suggesting China may shift holdings away from the greenback.

The single European currency rose to US$1.2151 at 10pm GMT from US$1.2105 late on Thursday in New York, hitting a three-month low.

The US dollar was meanwhile slid to ¥114.45 after ¥115.87 on Thursday.

Figures from the US Labor Department showed job growth slowed to 108,000 last month from an upwardly revised 305,000 in November and expectations of a 205,000 increase.

But upward revisions to back-data meant that the final outcome was nearly in line with forecasts. In addition, some of the disappointment was allayed by news that the unemployment rate fell to 4.9 percent of the workforce.

"Despite the relatively healthy US numbers, the euro continued its ascent against the dollar," said Boris Schlossberg, currency analyst at Forex Capital Markets.

"The market has now become even more convinced that the Fed will be forced to halt its monetary tightening cycle within the next 50 basis points for fear of triggering a potential recession," Schlossberg said.

Expectations of an imminent end to the Fed's monetary tightening were fueled earlier this week when minutes to the last Fed rate-setting meeting were interpreted as suggesting that the US rate-hike cycle may soon be coming to an end.

Schlossberg said the move to the euro was also spurred by comments from Hu Xiaolian (胡曉煉), director of the Chinese State Administration of Foreign Exchange, who said his agency plans "to actively explore ways of investing foreign exchange more efficiently."

That raised speculation that China, with a massive US$760 billion of US dollar reserves, may move to diversify some of its assets into euros, the analyst said.

In late New York trading, the US dollar stood at 1.2702 Swiss francs from SF1.2758 Thursday. The pound climbed to US$1.7706 from US$1.7554 late on Thursday.

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