Weak US jobs report sends dollar lower

AP News
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Posted: Jun 03, 2011 4:25 PM
Weak US jobs report sends dollar lower

The dollar slumped after a government report showed an unexpectedly small amount of hiring in May, reinforcing traders' suspicions that the U.S. economy is weakening. The euro also was bolstered versus the dollar by expectations that Greece will soon receive an extended aid deal.

The euro struck a one-month high of $1.4624 in late afternoon trading in New York Friday, up from $1.4482 late Thursday. The dollar tumbled to 80.26 Japanese yen, the lowest level since mid-May, from 80.84 yen. The British pound rose to $1.6418 from $1.6362.

The U.S. government said Friday that employers added just 54,000 jobs last month, the fewest in eight months and far below economists' expectations. The unemployment rate rose to 9.1 percent from 9 percent. Capital Economics economist Paul Ashworth said it is pretty clear that the economy ran into a brick wall last month. He said that will lead to calls for the Federal Reserve to continue a special program to keep interest rates low and support the economy.

That program, called "quantitative easing," is set to expire at the end of June. The Fed could restart the program later this year or early next year, Ashworth said.

Lower rates tend to weigh down a currency as investors seek higher yields elsewhere. The European Central Bank and other central banks overseas have already begun raising rates, which is helping support those currencies against the dollar.

Investors also bid up the euro Friday in relief that Greece will be granted the aid it is scheduled to receive in July. There had been worries that Greece could be denied those funds, leaving it at risk to default on its debt obligations next month. Jean-Claude Juncker, the head of the 17 eurozone finance ministers, also said he expects Greece's euro partners to come up with more emergency loan money for Greece beyond the 110 billion euro bailout fund approved last year. The private sector will also be asked to help on a voluntary basis, he said.

In other trading Friday, the dollar slid to 0.8362 Swiss franc from 0.8424 Swiss franc. The dollar rose to 97.73 Canadian cents from 97.60 Canadian cents.