* Underwhelming U.S. jobs report weighs on dollar
* Euro bounces from lows, Spain debt worries persist
* Options market reflect bias to euro weakness
By Julie Haviv
NEW YORK, April 6 (Reuters) – The U.S. dollar dropped
broadly on Friday in thin holiday trade after disappointing U.S.
jobs market data kept alive the prospect of more Federal Reserve
monetary policy support.
The dollar fell against the euro for the first time in five
days after data showed U.S. payrolls rose far less than expected
in March, offsetting sentiment that held throughout the week in
which Fed minutes from its March meeting had investors
downplaying more Fed action.
“It is a disappointment,” said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington, D.C.
“I think it highlights the fact that the Fed’s door is still
open to more asset purchases this year.”
The euro was last up 0.2 percent at $1.3086, bouncing
from a three-week low of $1.3033 hit the previous day. Dismal
data, fears about Spain’s debt levels, and expectations that
European Central Bank policy should remain accommodative has the
euro on track to notch a 2.1 percent loss this week.
Activity was light and trading desks thinly staffed,
however, with the U.S. stock market closed and bond market
closed early in observance of the Good Friday holiday. Much of
Asia was off as well.
“Monday’s price action will be a lot more telling as
participants in the U.S. and abroad digest today’s jobs data,”
said Daniel Hwang, senior currency strategist at Forex.com in
New York.
Hwang said euro uptrend technical support converges around
$1.3150, the 100-day simple moving average.
“Raised expectations of Fed stimulus should cause some
consolidation of the dollar next week, especially after this
week’s gains, and I think the euro is likely to test that
support level.”
The euro was also weighed by worries about Spain’s high debt
level as the hangover from a poor debt auction earlier in the
week fueled concerns over the country’s ability to tackle its
fiscal problems.
“I’m negative on the euro. It’s likely to keep extending
losses below $1.30 as there’s no event that could stop its
decline amid worries over Spain,” said Sumino Kamei, senior
currency analyst at Bank of Tokyo-Mitsubishi UFJ in Tokyo.
Against the yen, the euro was at 106.72, down 0.7
percent after hitting a one-month trough at 106.52.
Unease about the prospect of the euro was reflected in the
options market, with three-month risk reversals in the
euro/dollar biased for euro puts, trading at -2.10 vols
on Friday, up from 2.00 vols on Thursday’s and
-1.92 vols earlier in the week.
Euro/yen three-month risk reversals also showed partiality
against the euro, trading at -3.65 vols, up from
-3.45 vols on Thursday.
Broad euro selling led the euro to come close to 1.20 Swiss
francs, a level breached the previous day for the first time
since the Swiss National Bank set that level as a cap for the
Swiss currency in September 2011 in a bid to curb a sharp rise.
The euro hit a low of 1.2004 francs, according to
Reuters data, before recovering to last trade at 1.2008.
The dollar last traded at 81.58, down 0.9 percent and
on track for a 1.7 percent loss on the week.
