FOREX-Dollar rises; euro hurt as debt jitters resurface

Published 11/08/2010, 03:45 AM
Updated 11/08/2010, 03:48 AM

* Euro down 0.5 percent vs greenback

* Dollar buybacks continue after robust U.S. jobs data

* Euro falls as peripheral debt worries resurface

* Yen crosses fall, pressured by euro/yen selling

(Adds quotes, updates prices, changes dateline prvs TOKYO)

By Tamawa Desai

LONDON, Nov 8 (Reuters) - The dollar rose on Monday as an unwinding of dollar short positions that began with solid U.S. jobs data gathered pace, while renewed concern over euro zone peripheral debt hurt the euro.

With the U.S. Federal Reserve's decision to launch more quantitative easing out of the way, euro zone debt problems seemed to have reappeared on traders' radars.

On Friday, the 10-year Irish bond yield spread over benchmark German debt hit record highs, while the 10-year Spanish/German spread rose to its highest level since mid-July.

"Now that QE by the Fed has become a fact, the market is paying attention to other factors that were overshadowed ahead of the Fed meeting," said Roberto Mialich, currency strategist at Unicredit in Milan.

"Also, stronger-than-expected U.S. payrolls sparked more position adjustments and profit-taking on the euro. I see a consolidation of the euro between $1.38 and $1.40 during the week," he said, adding traders may be cautious about chasing the dollar too high ahead of the Group of 20 summit meeting in Seoul this weekend, which may address imbalances.

By 0828 GMT, the euro dropped 0.5 percent to $1.3953, after triggering stops as it fell through $1.4010 and $1.3990, its low of last Wednesday when the Fed said it would increase its asset purchases.

There was support at the day's low of $1.3920, the 61.8 percent retracement of its Oct. 20 to Nov. 4 rally to a 10-month high of $1.4283, and more at $1.3835, the 76.4 percent retracement. Some said the euro could fall towards $1.3750, having hit a late October low of $1.3756.

The dollar index, a measure of its performance against a basket of currencies, rose 0.4 percent to 76.889, as the greenback gained after U.S. jobs data blew past expectations on Friday.

Euro/yen selling out of Tokyo was also said to have helped send the single currency lower, which in turn weighed on other currencies against the yen.

The dollar was flat against the yen at 81.20 yen and a full yen above its 15-year low of 80.21 yen plumbed last week.

Japanese finance ministry data on Monday showed Tokyo stepped into the currency market to sell yen for dollars only once on Sept. 15.

"I think dollar/yen will eventually rise given the backdrop of a broad rebound in the dollar, though I suspect there will be very heavy offers around 82 yen," said a trader at a Japanese brokerage house.

The Australian dollar fell 0.3 percent to $1.0128, off a 28-year peak of $1.0183 scaled on Friday. The New Zealand dollar fell more than 1 percent to a low of $0.7868.

(Additional reporting by Hideyuki Sano in Tokyo; Editing by John Stonestreet)

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