Dollar drops to record low in wake of jobs data
The dollar fell to a record low against the euro on Friday, but gained ground versus the yen after strong data on the U.S. job market encouraged investors to wade back into risky carry trades.
The robust jobs data for October suggested the U.S. economy was far more resilient than many initially thought after a credit crunch hit the financial sector in the summer. That increased investors' risk appetite and boosted U.S. stock futures, analysts said.
The report also pared expectations that the Federal Reserve will cut interest rates again in December after easing by a quarter percentage point on Wednesday.
The jobs data is boosting equities, so it's helping support the carry trade. In general that's neutralizing the initially strong dollar support, said Michael Malpede, senior currency strategist at Man Global Research in Chicago.
At the very least, the data solidifies the likelihood that the Fed is on hold for the foreseeable future, but that doesn't change yield spreads all that much at this point, he added.
The euro, after initially falling to $1.4450, surged to an all-time high at $1.4525, according to Reuters data. It last traded at $1.4480, up 0.4 percent on the day Against the yen, and euro was up nearly 1 percent at 166.67.
The euro/yen pair is often viewed as a good barometer for carry trades.
The dollar index, which charts the greenback's progress against a basket of six major currencies, fell as low as 76.242 (.DXY: Quote, Profile, Research), the lowest in its more than 30-year history.
The dollar was up 0.5 percent against the yen to 115.10 yen.
The Labor Department said on Friday 166,000 new jobs were created last month, compared with a revised 96,000 in September. Markets were expecting new non-farm payrolls jobs of 80,000, according to a Reuters poll.
Following the data, the U.S. interest rate futures market has priced a 58 percent chance the Fed will lower benchmark rates again in December, down from as high as 76 percent earlier.
(Additional reporting by Steven C. Johnson)
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