Dec. 3, 2004
By Kate Gibson & Osamu Tsukimori, CBS MarketWatch.com
CBS MarketWatch
CHICAGO (CBS.MW) - The euro on Friday sailed to a new record high against the dollar, with the greenback knocked down again as November U.S. jobs data came in well short of expectations.
The greenback declined to a record low against the euro, plummeting to $1.3442 in afternoon U.S. trade before making a mild recovery to $1.3434 more recently. The European common currency hit what at the time was a record high of $1.3383 on Thursday.
The dollar most recently was off nearly 1 percent against the Japanese currency, at 102.16, after falling to a session low of 102.14 yen earlier on. The dollar dropped to an all-time low of 101.81 yen earlier in the week.
The government estimated U.S. nonfarm payrolls increased by 112,000 in November - far below forecasts that called for a count of around 204,000 - while the unemployment rate dipped to 5.4 percent.
"This is the weakest pace of job growth in four months," said Kathy Lien, chief strategist at Forex Capital Markets. "The release was weaker than even the lowest forecasts by economists, and especially surprising given last month's strong number."
Economists were looking for stronger growth of about 204,000 in November, according to a survey conducted by CBS MarketWatch. None of the 42 economists surveyed forecast a figure as low as 112,000.
Payroll gains in September and October were revised downward by a total of 54,000. October's gains were revised to 303,000 from 337,000. Over the past three months, job growth has averaged 178,000 per month.
Employment is up 2.3 million since the nadir in August 2003.
Further details of the business establishment survey were weak. Read the Economic Report.
The dollar, which hit a nearly five-year trough of 101.85 yen on Thursday, was recently trading at 102.44 yen. It was at 103.19 yen late Thursday in the United States.
Ahead of the U.S. report, the dollar advanced against the yen on expectations of a stronger number.
"Amid talk of possibly strong jobs data, investors took some profits on their short dollar positions," said Masatoshi Nishi, chief manager of the treasury and securities division at Saitama Resona Bank in Tokyo.
European Central Bank President Jean-Claude Trichet didn't comment on the possibility of foreign-exchange intervention at a news conference after Thursday's ECB meeting.
On Friday, Japan's Finance Minister Sadakazu Tanigaki said Tokyo will closely watch the currency movements and take action if needed.
The British pound climbed to $1.9327, compared with $1.9292 in late trading in the United States Thursday. It fetched a 12-year high of $1.9438 on Thursday.
Japan's upbeat corporate capital spending data released Friday had little effect on currencies.
Capital spending by Japanese companies grew 14.4 percent in the July-September quarter from a year earlier, higher than a 10.7 percent rise in the previous quarter, the Finance Ministry said.
"The bottom line is that the corporate sector recovery was alive and well in the third quarter despite the implied margin squeeze from soaring input prices during the period," J.P. Morgan economist Ryo Hino said in a research note.
Hino added that the higher-than-expected could prompt an upward change in the capital spending component of Japan's third-quarter gross domestic product. The revised data will be released Wednesday.
U.S. Trade Thursday
The dollar rebounded modestly from multiyear lows against the euro and the yen Thursday, as investors debate whether European and Japanese monetary authorities can continue to tolerate the U.S. currency's slide.
The buck got some help from a report that showed a stronger-than-expected 0.5 percent gain in the value of U.S. factory orders, although the increase was driven primarily by energy costs. See Economic Report.
The recent moderation in crude oil prices could also spell brighter economic fortunes for the greenback. See Futures Movers.
But, the fundamental driver of dollar trading, namely U.S. deficit financing challenges, hasn't been changed by U.S. economic data or oil prices, analysts said.
Kate Gibson is a staff writer for CBS MarketWatch based in Chicago.
Osamu Tsukimori is a reporter for CBS MarketWatch.com based in Tokyo.
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