Dollar Drops After Soft Jobs Data, ISM Services

MarketWatch.com, August 3, 2007

NEW YORK (MarketWatch) -- The dollar fell against other major currencies Friday after a government report showed the U.S. economy created fewer jobs last month than expected.

Nonfarm payrolls grew by a lower-than-expected 92,000 in July, the least seen since February, the Labor Department said. The nation's unemployment rate rose to 4.6%, up from 4.5% in June and the highest reading since January.

Economists had been expecting payroll growth of about 133,000, according to a survey conducted by MarketWatch. The jobless rate was expected to remain at 4.5%.

"The market reaction has so far been minimally dollar negative, as would be expected with a lower nonfarm payrolls reading," said Brian Dolan, chief currency analyst at Forex.com, a division of Gain Capital. "But given all the focus on the equity markets, it's probably more important how the equity market reacts."

In New York trading, the dollar was quoted at 118.59 yen, compared with 119.23 yen late Thursday. The euro stood at $1.3740, compared with $1.3701.

The British pound traded at $2.0379, compared with $2.0355. The dollar fetched 1.1980 Swiss francs, vs. 1.2044 francs

The euro was at 162.98 yen, compared with 163.12 yen.

U.S. stock losses mounted Friday after the latest employment report showed weaker-than-expected jobs growth and higher unemployment last month.

Kathy Lien, chief strategist at DailyFX.com, said the weaker jobs report "should push the Fed to seriously consider what the market has already decided for them, which is to lower rates at the end of the year."

"There were plenty of signs that payrolls were going to be weak," she said. "August will only be a tougher month given the tightening of credit and the blowup in the subprime sector."

"There is never just one cockroach in the closet, so we expect more hedge funds and home lenders to report major losses which cannot be positive for the labor market going forward," she said. "Today's news should be negative for both the U.S. dollar and the U.S. stock market."

Adding to the dollar's woes was a report showed nonmanufacturing sectors of the U.S. economy expanded at a slower pace during July.

The Institute for Supply Management said Friday that its nonmanufacturing index fell to 55.8% from 60.7% in June. Economists were looking the index to decline to 58.8%.