The U.S. dollar pared its earlier losses against major currencies at the end of the week as the latest nonfarm employment report was much better than expected, suggesting that the U.S.
Federal Reserve would lift interest rates earlier than expected.
It was the first time in months that a positive economic report drove the dollar higher. With risk sentiment remaining the main driving force in currency trading, the dollar tends to fall against the euro and other higher-yielding currencies on positive economic news, and to rise when investors worry about economic outlook.
The euro bought 1.4827 dollars in late Friday New York trading, about 0.8 percent lower than a week ago. The British pound fell 0.3 percent to 1.6479 dollars. The dollar fell 0.3 percent during the past week to 1.0589 Canadian dollars, and rose 1.2 percent to 1.0188 Swiss francs. It rose 4.6 percent to 90.70 Japanese yen.
According to a Labor Department report on Friday, U.S. nonfarm payroll employment fell slightly by 11,000 in November, which was much smaller than a forecasted loss from 85,000 to 125,000. The unemployment rate edged down
to 10.0 percent from 10.2 percent in October.
In the previous three months, payroll job losses had averaged 135,000 a month. In November, employment fell in construction, manufacturing and information, while jobs increased in the sectors of temporary help services and health care.
The much-better-than-expected November employment report suggests that many employers have reached the point where they cannot extract more from a shrinking workforce. To keep output growing, employers now have to add hours
and jobs, according to research group Global Insight.
The report cannot be dismissed as a seasonally-distorted freak and is mostly genuine good news, Global Insight said, adding the report shows that a bottom in the labor market is nearer than thought and it will be no later than the first quarter of 2010.
U.S. President Barack Obama said the job report is "good news, just in time for the season of hope," but warning that there is still a long way to go.
White House Press Secretary Robert Gibbs said the unemployment figures are the best released in the last 22 months. "The numbers today show that we continue to make much needed progress in getting this economy going again."
"There will be bumps along the way, there will be ups and downs in the process," Gibbs added.
In earlier sessions of the week, the dollar was mostly lower as most economic reports pointed to a gradual, fragile recovery. Investors had
expected the Fed to hold interest rates near zero well into 2010.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in October, increased 3.7 percent to 114.1 point from 110.0 in September, the National Association of Realtors (NAR) reported on Tuesday.
Analysts had expected that pending home sales would fell slightly in October, as the government tax credit for first time home-buyers was originally set to expire at the end of November.
The tax credit has been extended into next year. NAR chief economist Lawrence Yun cautioned that home sales could dip in the months ahead, as
time when buyers start looking at homes until they close on a sale can take three to five months.
The Institute for Supply Management (ISM) reported that its composite index for U.S. manufacturing sector fell by 2.1 points in November to 53.6. As the reading is above 50, it showed the manufacturing sector continued
growing in November, at a slower pace though.
The ISM composite index for services industries dropped by 1.9 points in November to 48.7, below the expansion/contraction threshold. It indicated that economic activity in the U.S. non-manufacturing sector contracted in November after two consecutive months of expansion.
U.S. construction spending remained unchanged in October, the Commerce Department reported, saying strength in home building was offset by weakness in commercial real estate and public construction.
Private payroll employment fell by 169,000 in November, fewer than in October but more than expected, according to payrolls firm ADP.
The European Central Bank (ECB) decided to leave its key rate unchanged at 1 percent on its monetary policy meeting Thursday. As it had signaled beforehand, the bank set out its plans at the meeting to start unwinding some of its extraordinary liquidity support measures.
The ECB stressed that its liquidity support remains substantial and indicated that its exit strategy will be gradual and timely given likely
gradual euro zone recovery and major uncertainties still surrounding the outlook. It also gives the impression that interest rates are likely to stay down at 1.00 percent until at least late 2010.
The Bank of Japan announced that it will provide 10 trillion yen (about 111 billion dollars) in short-term loans to commercial banks in an effort to combat the rising yen and growing deflation. The central bank made the
announcement after it called for holding an unscheduled meeting over the current economic situation on Tuesday.
Japanese Prime Minister Yukio Hatoyama was cited on Wednesday by the Nikkei newspaper as saying the yen's strength cannot be left as it is.
As investors are closely watching whether the Japanese government would take actions on the yen's appreciation, Chief Cabinet Secretary Hirofumi Hirano said later that Hatoyama wasn't indicating the government is ready to
intervene.