April 4, 2014 3:46 pm

Dollar nudges higher on mixed US payrolls data

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The dollar nudged higher on Friday following a set of US employment data that neither swayed in favour of the strong pick-up story, nor detracted from the long-held trend of plodding recovery.

Implications for interest rates and monetary policy, most analysts agreed, was for the Federal Reserve to maintain the status quo of gradual removal of monetary stimulus, while keeping the main Fed funds rate at close to zero for an extended period.

At 192,000, the headline net jobs creation figure for March fell slightly shy of expectations of about 200,000. The unemployment rate held at 6.7 per cent.

“The mixed payrolls data work with most of the Fed’s thoughts that the labour market will give them plenty of time before needing to respond to the recovery,” said Alan Ruskin at Deutsche Bank.

Joshua Mahony at Alpari agreed: “Despite providing a somewhat underwhelming view of the jobs market, there is a common belief that it is enough to keep the Fed train moving on the same path for the foreseeable future.”

The dollar index, a measure of the US currency’s relative strength against a basket of its six biggest peers, rose 0.1 per cent to 80.53.

The euro fell 0.2 per cent against the dollar to $1.3698 following the data. Over the week, the euro was down 0.4 per cent as the European Central Bank appeared to take a step further down the road to quantitative easing. Mario Draghi, president, gave the strongest signal yet that the ECB was prepared to embrace QE.

“Despite the discussion of further unconventional measures including negative deposit rates and QE, the euro’s setback is likely to remain limited,” said Hans Redeker at Morgan Stanley.

While Indian stocks were boosted to record highs by growing hopes of an election victory for Narendra Modi’s BJP, the rupee’s progress stalled this week. But the currency did manage a fresh eight-month high of Rs59.67.

The dollar reasserted itself later in the week and over the five trading sessions was 0.3 per cent higher at Rs60.08.

New Zealand’s dollar fell from its near three-year high this week after weaker than expected data, which included a sharp fall in the prices of milk and dairy products, among the country’s main exports.

Although the kiwi rallied 0.6 per cent on Friday, it remained 0.7 per cent lower over the week at $0.8594.

Sterling also slipped this week, down 0.3 per cent to $1.6583, while Japan’s yen fell 0.9 per cent to Y103.70.

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