July 08, 2007	Sunday	Jamadi-us-Sani 22, 1428

NEW YORK, July 7: The dollar dropped on Friday to near-record lows against the euro as a strong US employment report failed to allay traders' concerns about the state of the world's biggest economy.

The European single currency was trading at $1.3626 , up from $1.3596 late Thursday and not far from its all-time record peak of $1.3682 on April 27.

Against the yen, the dollar traded Friday at 123.34, up from 122.92 late Thursday, while the euro hit a peak of 168.15.

The US currency got a short-lived boost against most other major currencies after a key non-farm payrolls report exceeded expectations, the latest in a recent string of healthy indicators on the US economy.

Figures from the Labor Department showed the United States added 132,000 jobs in June, slightly more than expected, while the unemployment rate was unchanged at 4.5 percent and the two previous months' job gains figures were revised sharply upward.

Despite the strong report it was not surprising that subsequent dollar gains were only temporary, said Neil Mellor at the Bank of New York.

The dollar is up against a barrier, he explained.

From a technical point of view it has had the upper hand recently, but in terms of underlying interest rate expectations, which are the predominant driver in the market, the dollar's problem is that a Federal Reserve rate hike is simply not in the picture.

Unlike in Europe, interest rates in the US have probably hit a peak and there's a very good chance of further gains by the euro against the dollar and sterling (the pound) against the dollar, he said.

Paul Ashworth, senior US economist at Capital Economics, pointed out that while US employment growth had slowed over the last few months, there has been no corresponding rise in the still low unemployment level.

Until developments in the labor market change significantly one way or another, the Fed will remain on hold, said Ashworth.

Meanwhile, the euro and the pound were both steady as the market digested interest rate decisions and hawkish rhetoric from central banks Thursday.

The European Central Bank left its base rate on hold at 4.0 per cent, as expected, but indicated it may raise eurozone rates in September.—AFP