LONDON, May 9: The dollar strengthened against the euro and yen on Monday, profiting from stronger-than-expected US employment data which has fuelled expectations of further rises in American interest rates, analysts said. Sterling fell following disappointing British manufacturing data and ahead of an interest decision by the Bank of England, which was expected to keep the cost of borrowing at 4.75 per cent for the ninth month in a row.

The single European currency eased to 1.2818 dollars in early European trading from 1.2819 late on Friday in New York.

At one point in trading in Asia on Monday the euro slumped to 1.2789 dollars — the lowest point since April 15.

The dollar stood at 105.41 yen, from 105.07 dollars on Friday. The dollar should continue to strengthen into the week supported by the robust payrolls report and expectations of a solid April (US) retail sales report, Calyon economist Mitul Kotecha said.

The US economy generated 274,000 jobs in April, beating expectations of about 194,000 — a reading that eased concerns of a US economic slowdown and supported the notion of more rate hikes by the Federal Reserve, analysts said.

Relative growth and interest rate/yield differentials in favour of the US will likely keep the greenback well supported near-term, ABN-Amro economist Paul Mackel said.

The dollar was supported also by fading speculation that China was ready to revalue its currency soon, dealers said.

In the past few weeks speculation has been rife that China would soon revalue its currency, giving a boost to other Asian units at the same time.

Chinese Vice Minister of Finance Li Yong said on Friday that his country was working hard on “modalities” governing its exchange rate system but had a long way to go before deciding whether to allow the yuan to appreciate.

Elsewhere, sterling struggled Monday after official data showed that Britain’s manufacturing output fell for the third month running in March, recording the lowest reading since June 2002.

Manufacturing output in March dropped by 1.6 per cent from the previous month, against expectations of a modest 0.1-per cent increase, the National Statistics Office said.

—AFP