June 08, 2008	Sunday	Jamadi-us-Sani 03, 1429

NEW YORK, June 7: The dollar tumbled on Friday after a US government survey revealed a much higher-than-expected jump in the nation’s unemployment rate during May to 5.5 per cent.

Analysts said the report underlined lingering economic woes but noted the Federal Reserve’s precarious position because further interest rate cuts could spur inflationary pressures which have already been stoked by skyrocketing crude oil prices.

Forex Capital Markets senior currency strategist Boris Schlossberg said the dollar had been “crippled” by the employment report which also showed the world’s largest economy shed 49,000 jobs last month.

Despite (Fed) Chairman Bernanke’s promise to keep rates steady at two percent the Fed may be forced to lower them further if the labor situation continues to deteriorate, Schlossberg said.

Around 2100 GMT, the euro was at $1.5777, up significantly from $1.5590 in New York late on Thursday.

Against the Japanese currency, the dollar sank to 104.90 yen from 105.93.

The sharp fall in the dollar contributed to a jump in a key New York oil futures contract, which leapt $10.75 a barrel -- the biggest one day jump ever -- to close at $138.54.

The oil price rally and the bleak job report triggered the worst day on US stock markets in 15 months as the Dow Jones Industrial Average plummeted 394.64 points (3.13 per cent) to end at 12,209.81.

Most economists had expected a sharply lower unemployment rate of 5.1 per cent. The increase was the largest monthly change since February 1986; the last time the rate rose more than 0.5 percentage point was in May 1980, when it climbed 0.6 point.

Analysts said currency traders were also looking for a reason to sell the dollar against the euro following comments from European Central Bank President Jean-Claude Trichet.

Trichet, citing projected record high inflation in the eurozone this year, on Thursday warned that eurozone interest rates might have to be raised in July, making the euro even more attractive to investors.

The signal by ECB President Trichet that the ECB intends to raise its key interest rate by a 0.25 points to 4.25 percent next month has understandably fueled renewed demand for the euro, said Derek Halpenny of Bank of Tokyo-Mitsubishi.

But eurozone data released Friday was not particularly encouraging, with German industrial production posting a surprise 0.8 per cent decline in April, much worse than analysts’ expectations of a 0.2 per cent increase.

The boom is over. Just as the European Central Bank is shocking markets by pointing to a rate increase in July, the pillars of the economic upswing are crumbling, said Holger Schmieding at Bank of America.—AFP