October 5, 2003	Sunday	Sha’aban 8, 1424

NEW YORK, Oct 4: The dollar surged against major currencies on Friday as a surprisingly robust US employment report for September gave glimmers of hope that economic recovery in the United States may be sustainable after all.

After a brief setback when the greenback pared some gains in the wake of slightly weaker-than-expected US service sector data, the dollar got a second wind, bruising the euro, which fell 1 per cent against the greenback and further punishing the Swiss franc, down about 1.4 per cent on the day.

But traders continued to keep one eye out for the possibility of yen-weakening intervention by the Bank of Japan, even with the dollar off the ropes against the Japanese currency for now.

By late afternoon in New York, the euro was down 0.98 per cent at $1.1576. Against the yen, the dollar was trading at 110.80 yen, up 0.14 per cent. Against the Swiss franc, the dollar was at 1.3357 francs, up 1.39 per cent.

The pound was down 0.46 per cent to $1.6618.

All eyes were on the state of the US labour market, still the main catalyst event of the session, which had lifted the dollar earlier in the day and continued to buoy it.

The message from these data is that there is dollar upside on the back of strong economic data, said Steven Englander, chief FX strategist Americas at Barclays Capital in New York.

The monthly jobs report showed nonfarm payroll jobs rose 57,000, outstripping economists’ consensus forecasts for a loss of 30,000, while the jobless rate remained at 6.1 per cent, compared with economists’ forecasts for an increase to 6.2 per cent.

The market may have to reexamine other labour market indicators such as initial claims which have come well below 400,000 and conclude that there is more sustainability to US recovery than expected, Englander said.

The dollar was mostly unfazed by a slightly soft services sector report.

The Institute for Supply Management’s non-manufacturing business index was 63.3 in September, compared with economists’ forecasts for a reading of 62.5. Analysts said the ISM’s service sector data, while coming slightly lower than expected, were close enough to consensus forecasts not to undermine the dollar’s overall bullish trend on Friday following strong payrolls data.

The ISM number did not impede the market’s determination to buy the dollar in the wake of the payrolls report. It still points to healthy growth in the non-manufacturing sector, said Sean Callow, currency strategist at IDEAglobal in New York.

Traders remained alert about possible yen-weakening intervention by Japan, even though the greenback, which has been well-bid for most of the session, appeared to be enjoying a temporary reprieve against the Japanese currency.

But traders were disappointed by the dollar’s fairly lackluster bounce against the yen as the greenback failed to push decisively above 111 yen.

There has been a wall of offers for dollar/yen at the 110.75-110.80 area, and this is preventing the dollar from getting over that 111 yen barrier, said Philip Capone, senior trader at Fortis Bank in New York.

Going into next week, traders will continue to be on the lookout for BoJ action if the dollar stubbornly clings to levels below 111 yen.

I expect a major retest of the 110 yen area going into next week, said Cyrus Whitney, head dealer at Commerzbank in New York.

No one knows what the BoJ will do but expect them to pretty much defend that level, he said. —Reuters