The greenback tumbled against major currency against major currencies after the release of much weaker-than-expected U.S. jobs reports since August 2003, adding speculation of a recession and increasing the likelihood of an aggressive rate cut by the Federal Reserve this month.
U.S. employers added 18,000 positions to their payrolls last month (forecast of 75,000 new jobs), compared with an upwardly revised 115,000 jobs in November. The unemployment rate rose to a two-year high of 5% in November, from 4.7% in November.
Interest-rate futures showed a 58% chance that the Federal Reserve will cut borrowing costs by a half-percentage point on Jan. 30. from 34 percent on Thursday and no chance a week ago. The odds of a quarter-point cut were 42%.
U.S. stocks tumbled broadly on the payroll report, pushing the Standard & Poor's 500 Index down 3.8% this week, its biggest drop since October. The Dow Jones industrial average was down 256 points or 1.96% on Friday. The Nasdaq Composite index was down 98 points or 3.77%, the biggest one-day percentage drop since Feb. 27.
The greenback tumbled versus the Japanese yen from 109.60 to 107.90 on active cross buying in jpy. Euro, aussie and sterling fell sharply versus yen from 161.54 to 159.78, from 96.61 to 94.42 and from 216.80 to 213.54 respectively. The single currency rallied to 1.4695 to 1.4825 against the dollar before paring gains on position adjustments ahead of the weekend and on the release of slightly better-than-expected ISM non-manufacturing index. The Institute for Supply Management's index of non-manufacturing businesses, which make up almost 90 percent of the economy, came in at 53.9 for December (forecast was 53.5) from 54.1 the prior month.
The British pound rebounded briefly from 1.9674 to 1.9851 on weak U.S. jobs report and then fell again to 1.9711 later in the day on active cross selling in sterling. Euro rallied against the sterling to a record high of 0.7493. The greenback fell versus the Swiss franc from 1.1163 to 1.1019 and then rebounded to close at 1.1083 on Friday.
Next week will see the release of ...