US dollar hit by weak US private sector jobs

dataPosted: 03 July 2008 0504 hrs




NEW YORK: The US dollar slumped to a two-month low against the euro on Wednesday on a report that the US private sector lost 79,000 jobs last month, raising fresh fears about the health of the world's largest economy. Traders were also anticipating a move on Thursday by the European Central Bank to raise eurozone interest rates a quarter of a point to 4.25 percent, which could boost the euro further against the dollar. The single European currency fetched 1.5876 dollars at 2200 GMT after 1.5796 on Tuesday. The dollar declined to 105.84 yen from 106.10. The ADP private sector employment index, seen as an indicator of how closely watched figures for overall US job creation on Thursday might look, showed that US companies shed 79,000 jobs in June, far more than had been forecast. The news provided a further excuse to sell the dollar, with the euro bolstered ahead of the widely expected ECB rate hike on Thursday. "Conditions in the labour market are still weakening, albeit gradually," said Paul Ashworth of Capital Economics. "The economy is a long way from being out of the woods yet." The market will pay close attention to ECB president Jean-Claude Trichet's press conference, following the interest rate decision on Thursday, for clues as to whether the ECB will have room for further rate hikes later in the year. Although recent statistics have suggested that the eurozone economy is starting to falter, strong producer price data earlier on Wednesday showed that inflationary pressures - the ECB's main concern - continue to mount. Markets were bracing for volatility with the ECB decision coming the same day a key report on US non-farm payrolls is released in Washington. Analysts expect the report to show a loss of 60,000 jobs in June. "The ECB press conference and the (labour) report will either neutralise each other or be a toxic combination for the US dollar," said Kathy Lien at Forex Capital Management. In late New York trade, the dollar stood at 1.0141 Swiss francs after 1.0199 on Tuesday. The pound was at 1.9925 dollars from 1.9950. - AFP/de