Dollar tumbled against most of its counterparts on Friday as release of weak U.S. non-farm payrolls data added speculation that the Federal Reserve may need to take more stimulus measures at its next meeting on Tuesday to prevent the U.S. economy from going into a double-dip recession.
Although the greenback edged higher against the Japanese yen in Asia after Thursday's weakness to 85.71, renewed selling at 86.19 in European morning capped intra-day rise. The pair then tanked to a fresh 8-month low of 85.02 after the release of weaker-than-expected U.S. non-farm payrolls and later staged a minor recovery in NY afternoon.
U.S. non-farm payrolls in July fell 131k, more than market forecast of minus 65k. The drop in payrolls showed the rise in private-sector employment was not enough to make up for the government jobs lost, however, the unemployment rate stayed unchanged at 9.5%. U.S. 2-year Treasury note yield dropped below 0.5% for the first time ever, suggesting market is getting more pessimistic on U.S. economy. Market is speculating the Fed may consider taking steps (quantitative easing) to support the fragile U.S. economy at next Tuesday's FOMC meeting.
In other news earlier, the head of one of Japan's business lobbies said that 'the government should not intervene in the forex market despite a firmer yen, which weighs heavily on Japanese exporters' profitability.'
Although the single currency traded sideways in Asia on Friday and retreated from 1.3204 to an intra-day low of 1.3157 after the release of weaker-than-expected German industrial production data which fell by 0.6% in June versus the economists' forecast of 0.7% rise, the pair swiftly rallied above Tuesday's high of 1.3262 after the release of weak U.S.jobs data. The single currency eventually hit a fresh 3-month high of 1.3334 and then retreated on profit-taking.
The British pound aslo traded narrowly in tandem with euro in Asia and ratcheted higher to 1.5920 in European morning, sterling fell sharply to an intra-day low of 1.5840 after the release of disappointing U.K. economic data. However, cable then rallied after release of U.S. non-farm payrolls and hit a fresh 6-month high of 1.5999 in NY morning after triggering stops above 1.5925 and then 1.5968, sterling later retreated on profit-taking and weekend long liquidation.