Euro slumps to five-week low on dollar as US payrolls set to jump
Published 07/01/2011 | 05:00
THE euro slumped to a five-week low against the dollar yesterday, breaching a key support level, with more losses seen if upcoming jobs data proves stronger than expected.
Upbeat US data has painted a rosier picture of the economy and is in stark contrast to worries about the eurozone's sovereign debt crisis.
Magnifying euro losses are expectations that today's US employment report will show a 175,000 gain in non-farm payrolls for December, according to a Reuters poll.
Some in the market are expecting an increase of as much as 500,000.
"There's a strong consensus that there will be some good numbers coming out of the States, and expectation of a huge payrolls number is fuelling all sorts of dollar buying," said C.J. Gavsie, managing director of FX sales at BMO Capital Markets in Toronto.
The euro broke below support at $1.30 yesterday, suggesting more losses to come. It fell to $1.2997 on trading platform EBS and last traded down 1pc at $1.3018.
The next downside target is $1.2970, the euro/dollar's December low, traders said.
The euro came under heavy selling pressure after spreads between peripheral eurozone government bond yields and benchmark German debt widened on concerns about the region's spreading and deepening debt crisis.
A round of bond issues by peripheral eurozone economies next week raised concerns about their high debt levels.
That caused peripheral spreads to widen versus benchmark German debt, hitting the eurozone single currency in a vicious spiral.
Traders said the euro's slide below its 200-day moving average around $1.3081 accelerated its decline and some said the euro could fall to $1.2575 in fairly short order. (Reuters)