Forex - Dollar in retreat as traders book profits after post-payrolls surge
Dollar may retreat?
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LONDON (AFX) - The
dollar has started the week on the back foot as investorsbook profits from the US
currency's sharp rally in the wake of Friday'sbetter-than-expected US jobs data. "The dollar posted some solid gains after Friday's better-than-expectednon-farm payroll reading, but just how sustainable this rally will be in thedays ahead remains to be seen," said David Jones, chief markets analyst at CMCMarkets. "We've already observed something of a reversion against both the pound andthe common currency, largely as traders are calling the greenback as overboughtjust now, and with little of real significance on the economic calendar today,it's going to be precisely this type of sentiment that determines where
currencies move in the next few hours," he added. The dollar enjoyed one of its best days in weeks last Friday when the LaborDepartment reported that the US economy added 167,000 jobs in December, morethan double what the market anticipated. There was further good
news that the number of jobs added in October andNovember, was revised up by 29,000 to a cumulative two-month total of 240,000. Elsewhere, the unemployment rate, taken from a separate survey ofhouseholds, remained at 4.5 pct in the month, while average hourly wages rose0.5 pct in December, or 0.08 usd, to 17.04 usd. The payrolls data are crucial for the market's assessment of the likely pathof US interest rates in the coming months. The dollar was ravaged towards the end of last year after a wave of bad USeconomic news stoked fears that the world's largest economy may slow downdramatically and prompt the US Federal Reserve into loosening policy. That triggered a sharp slide in the dollar to a 21-month low against the
euro and to its lowest level against the pound since
sterling's ignominious exitfrom the European exchange rate mechanism in September 1992. The Fed has kept its benchmark rate unchanged at 5.25 pct for fourconsecutive meetings after raising it 17 times in a row. Analysts said Friday's data further reinforced expectations that the Fedwill not be changing rates any time soon, in sharp contrast to the situationjust a month ago. "The dollar has started the year strong on the back of rising rates," said
JP Morgan analyst Jan Loeys. London 0911 GMT Singapore 2.40 pm (0640 GMT)
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