DJ UPDATE: Dlr Extends Decline Vs Euro, Yen After ADP Jobs Data

Jan 07, 2009 (Dow Jones Commodities News via Comtex) -- AEOPF | Quote | Chart | News | PowerRating -- (Update to add analyst's quote; UK's Brown and Darling on growth; BOE, ECB rate meetings; fresh currency prices.)

By Min Zeng

Of DOW Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--The dollar was tripped up by worse-than-expected private U.S. job data Wednesday morning.

The greenback hit an intraday low of $1.3747 against the euro and dipped to as low as Y92.44 after a report by payroll giant Automatic Data Processing Inc. (ADP) and consultancy Macroeconomic Advisers showed job losses of 693,000 in December, far larger-than-expected. Though the ADP report hasn't been an accurate predictor of the official non-farm payroll data, the number did raise concern of an ugly government jobs report Friday.

"The job data just pointed to a much weaker economy than we thought and the dollar traded with a heavy tone," said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York.

The dollar started to decline overnight after U.S. policy makers painted a bleak growth outlook in their minutes released Tuesday afternoon from their December policy meeting. The central bank cut the fed-funds target rate to a range of zero to 0.25% at that meeting and opened the door to using unorthodox measures to stimulate growth.

Currency strategists at Credit Suisse noted that the dollar has been trading with a "more defensive tone" since the release of the Fed minutes. The strategists said the Fed's stance is "bearish" for the dollar, but preferred to express this view versus the yen as the euro remains more vulnerable to poor domestic news flow.

Wednesday was the dollar's first session of decline against the euro and the yen in 2009. The greenback was also down against the pound and the Canadian dollar.

In recent mid-morning trading, the dollar recovered some ground but still remained underwater against its main rivals. The euro traded at $1.3672 from $1.3509 late Tuesday, according to EBS. The dollar was at Y93.09 from Y93.83. The common currency traded at Y127.25 from Y126.66. The pound traded at $1.5058 from $1.4924. The dollar traded at CHF1.0956 from CHF1.1165. The U.S. dollar was at C$1.1825 from C$1.1834.

Some market participants said the dollar was expected to trade in a narrow range against major rivals ahead of the rate decision from the Bank of England Thursday and the payrolls report Friday. Economists surveyed by Dow Jones Newswires expect December payrolls to fall by 500,000.

The BOE has cut three percentage points off the benchmark rate since October, reducing it to 2% as fear increased that the nation's economy may suffer from a protracted downturn. Any further reduction will send the central bank's key rate to its lowest level since the central bank was founded in 1694.

The pound was down slightly against the euro as U.K. Chancellor of the Exchequer Alistair Darling said in an interview with the Financial Times that "we are far from through" the economic downturn, a sign that he will likely revise the government's forecast that recovery would begin in mid-2009. U.K. Prime Minister Gordon Brown said Wednesday keeping inflation and interest rates low was crucial for the U.K.'s economic prospects.

The euro traded at GBP0.9075 from GBP0.9044 late Tuesday.

Still, the euro has come sharply off the record high of GBP0.9804 hit on Dec. 30, as the buying momentum has slackened amid speculation that the European Central Bank may need to cut rates further to bolster growth. The ECB is set to meet on Jan. 15 to set rates.

The rate-cut speculation has been strengthened following a report Tuesday which showed the inflation rate in the euro zone has retreated below 2%, giving the central bank more wiggle room to reduce interest rates.

-By Min Zeng, Dow Jones Newswires; 201-938-2096; min.zeng@dowjones.com

(END) Dow Jones Newswires

01-07-09 1000ET

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