MW: Europe modestly lower after central bank calls
By Nick Godt & Laura Mandaro, MarketWatch
NEW YORK (MarketWatch) -- The U.S. dollar edged lower against the yen Friday, and traded nearly flat against the euro, after a surprise jump in the U.S. jobless rate to more than 10% comforted views the Federal Reserve will stick to a loose monetary policy.
"Fed policy is likely on hold for a very long time," said RDQ Economists John Ryding and Conrad DeQuadros in emailed comments after the Labor Department said the jobless rate jumped to 10.2% in October, more than economists anticipated, and payrolls contracted.
"We expect the dollar to suffer against other currencies, gold and commodities as a consequence," they wrote.
The dollar slumped against the Japanese yen, another low-yielding currency, buying 89.88 yen from 90.73 in late North American trade Thursday.
But the dollar index (DXY 75.77, +0.08, +0.10%) , a measure of the greenback against a trade-weighted basket of rival currencies, stood at 75.760, virtually unchanged on the day.
The report first prompted a "knee-jerk bout of dollar buying, as bad economic news was viewed to be negative for risk appetite and for dollar carry trades," said Michael Woolfolk, currency strategist at the Bank of New York Mellon, in a note. "However, dollar gains proved short-lived."
For the week, the dollar index has lost 0.7%.
The euro, which had advanced against the U.S. dollar after the unemployment report, recently traded lower at $1.4840 from $1.4874 late in the prior session.
The U.S. economy shed 190,000 jobs last month, lifting the unemployment rate above 10% for the first time in 26 years, the Labor Department said. The report also revised statistics for September and August.
Economists surveyed by MarketWatch, were looking for a decline in nonfarm payrolls of 150,000 and for the unemployment rate to rise to 9.9%. See full story.
Risk stuck at neutral
The jobs report also held back stocks on Wall Street, leaving investors who've been borrowing dollars to invest in higher yielding assets stuck in the middle.
"Both dollar bulls and dollar bears were likely disappointed in the whipsaw price action this morning, with many in both camps getting stopped out," Bank of New York's Woolfolk said.
Exceptionally low rates in the U.S. have fueled a dollar carry trade, whereby investors borrow dollars to invest in riskier assets, such as stocks and commodities.
Both the S&P 500 Index (SPX 1,069, +2.67, +0.25%) and the Dow Jones Industrial Average (INDU 10,023, +17.46, +0.17%) ended with slight gains.
