NEW YORK, Nov 8: The dollar fell on Friday, giving up gains built on stronger-than-expected US jobs report as investors who bid up the greenback ahead of the data decided to take their profits and head home for the weekend.

The Department of Homeland Security squashed a rumor making the rounds in the markets that the US terror alert level had been raised. The alert status remains at “yellow” or an elevated risk of attack, an official told Reuters on Friday.

While some traders speculated the terror alert status rumor was behind the dollar’s decline, several sources told Reuters the terror rumors were little more than noise and too coincidental to the position readjustment already underway as European desks closed up for the night.

There was no market reaction to an announcement that the United States was closing its diplomatic missions in Saudi Arabia on Saturday to review the security situation, saying credible information indicates guerrillas were close to carrying out attacks.

Day traders saw the good numbers, embraced the dollar and got overextended. But the rally ran out of steam and they had to turn tail and cover their positions, said John Hazelton, director of foreign exchange at PNC Bank in Pittsburgh.

In essence they met some decent euro/dollar bids from Europeans closing their books for the weekend, and that forced them to (sell the dollar), he said.

The US labour market showed a real spark of life in October, surging past forecasts with 126,000 new jobs created last month. Economists, according to the Reuters survey, expected an increase of 58,000. The unemployment rate edged down to 6.0 per cent from 6.1 per cent.

The strong jobs data prompted some economists to revise their views on when the Federal Reserve would raise interest rates, but the majority held firm to their previous estimates.

While 18 out of 20 economists polled by Reuters on Friday said that the Fed is not going to raise interest rates before June 2004, four brought forward their timing for a rate hike. The benchmark fed funds rate stands at 1.00 per cent, a 45-year low.

Some traders in London cited hedge fund activity as one factor behind dollar’s decline.

In late New York trade, the euro rose to a high of $1.1543, up more than 1 per cent in value before drifting back to $1.1521. Immediately after the US payrolls data the euro had fallen to a six week low of $1.1377.

We have had a slew of very good (US economic) numbers which have taken the euro down from $1.18 to where it is now. But we need to see more good numbers for the dollar to extend (the) upward move.—Reuters