NEW YORK, Aug 3: The dollar slipped on Friday after weak US jobs data gave a further sign that the economic recovery is in peril and raised speculation the Federal Reserve’s next move might be to ease, not raise, rates.

But investors had little appetite for aggressive purchases of European currencies or the yen, mindful of how a US slowdown could hurt modest recoveries in Europe and Japan.

That’s one of the problems of a globalized economy, and it’s why people are puzzled and don’t know what to do. Where can the risk capital really go? asked a trader at a European bank in New York.

The US Labour Department said the number of new jobs created outside the farm sector rose just 6,000 in July, far less than the 69,000 expected on average by economists and which had been priced into the market.

Even after a revision of June’s payrolls rise to 66,000 from 36,000, the combined two-month gain still fell short of forecasts.

The jobless rate was unchanged from June at 5.9 per cent.

By early afternoon in New York, the euro was trading at 98.72 cents, up 0.36 per cent in the session.

The dollar was down 0.21 per cent against Japan’s currency at 119.05 yen.

Against the Swiss franc, the dollar was off 0.05 per cent at 1.4710 francs. Sterling, recovering from hefty falls on Thursday, gained 0.67 per cent on the dollar to 1.5712.

The jobs report was the latest evidence of a US recovery at risk.

Earlier in the week, the government reported that the economy advanced at a 1.1 per cent annualized pace in the second quarter, half the expected rate. On Thursday, a key gauge of factory activity fell sharply, sparking a sell-off in US stocks and the dollar.

The surprisingly weak results have some economists pushing back their expectations for a Fed tightening into well into next year. Fed fund futures were pricing in an ease of almost 25 basis points by December.

Goldman Sachs in a report which helped send the two-year Treasury note to a record low yield under 2.02 per cent said it now expected the Fed to cut the funds rate by 75 basis points to one per cent by the end of the year to ward off a double-dip recession.

Stocks also were lower. Both the Dow Jones industrial average and the tech-stuffed Nasdaq Composite were down more than two per cent.

Dealers said the dollar’s reaction to the poor jobs data was muted because the market had positioned itself for bad news after the Institute for Supply Management index on Thursday showed manufacturing growth grinding nearly to a halt in July.

The Street was bracing for a weak (jobs) number ... so they sold dollars ahead of time, and when the data came and went and there was no follow-through, there was some dollar short-covering, said Andrew Delano, currency analyst at IDEAglobal.

Analysts said a slowing US recovery was not good for the dollar. But they said it was hard to find a currency that would benefit greatly from malaise in the world’s largest economy.

What people are beginning to realize is that a weak US. economy has ramifications for the rest of the world,’ said John McCarthy, director of foreign exchange at ING Barings.

Data from Europe was mildly encouraging on Friday, partly because economic sentiment for the 12-member euro zone, while lower in July, was down less than expected.

Business confidence actually improved slightly. The European Commission’s business climate indicator rose to minus 0.35 in July from a revised minus 0.45 in June.

But analysts said the outlook for Europe remained cloudy, and Japan remained burdened by sluggish economic reforms and persistent deflation.

You still have the land of Yankee ingenuity and know-how experiencing slower than expected growth, but Europe is not doing any better, so the dollar is holding in, said Carey Leahey, senior US economist at Deutsche Bank Securities.

It is kind of like the old Ronald Reagan expression, ‘you can run but you cannot hide.’ So where are you going to hide your money? he asked.—Reuters