NEW YORK, Jan 5: The dollar fell on Friday as a disappointing US payrolls survey highlighted soft economic conditions that boosts the risk of recession and further rate cuts by the Federal Reserve.

The euro edged higher to 1.4765 dollars from $1.4746 in New York late on Thursday.

The dollar fell to 108.63 yen from 109.30 yen late Thursday.

The data from the US Labour Department on Friday showed that only 18,000 new jobs were created in Dec, well below the 70,000 rise expected by analysts.

Further bad news emerged with the news that the unemployment rate, taken from a separate survey of households, jumped to 5.0 per cent in December, the highest rate since November 2005 and higher than the 4.8 expected by economists.

The markets interpreted the data as increasing the likelihood that the Fed would continue to cut interest rates this year in order to avoid a recession.

This data raises the probability of the Fed lowering rates by 50 basis points at their next meeting on January 30, said Hilary Love at PNC Bank.

The dollar managed to claw back some losses against the euro, to the surprise of some analysts.

I’m suprised that the euro hasn’t managed 1.49 dollars this week, said John Kicklighter at Forex Capital Markets.

We have seen unusual volatility thanks to the unusual liquidity conditions and traders putting trades back on their books for the new year. Other data on Friday helped stem the selling tide, helping the US currency to move off its lows.

The non-manufacturing Institute of Supply Management (ISM) index fell to 53.9 in December from 54.1 in the previous month and a sliver above the market consensus for 53.8.

The service sector is expanding but is under some pressure. That is consistent with the view that growth will be positive, but pretty weak, said Joel Naroff of Naroff Economic Advisors.

Coupled with the manufacturing and employment reports it strongly suggests that the economy could use some more help.—AFP