* Risk appetite increases after U.S. data
* Strong U.S. jobs reading offsets weaker ISM data
* Safe-haven dollar, yen, Swiss franc under pressure
(Updates prices, adds quote, details)
By Wanfeng Zhou
NEW YORK, Sept 3 (Reuters) - The U.S. dollar fell against
the euro and commodity currencies on Friday after surprisingly
strong U.S. jobs data eased worries about the outlook for the
economy and boosted appetite for riskier assets.
The safe-haven yen and Swiss franc weakened broadly, while
higher-yielding currencies such as the Australian and Canadian
dollars gained as expectations grew the U.S. labor market may
not be as weak as many had feared.
However, optimism about the U.S. economy faded somewhat
after separate data showed the non-manufacturing sector grew at
a slower-than-expected pace in August. That prompted major
currencies to consolidate in ranges as liquidity thinned ahead
of the Labor Day holiday weekend.
"Risk-on is definitely the trade today," said John Doyle,
senior currency strategist at Tempus Consulting in Washington.
"And we've seen the dollar fall accordingly against the
higher-yielding currencies."
In midday trading, the ICE Futures U.S. dollar index
<.DXY>, which tracks the greenback versus a basket of six
currencies, fell 0.4 percent to 82.122.
U.S. nonfarm payrolls fell 54,000, the Labor Department
said, a much smaller drop than an expected decline of 100,000.
In addition, private employment, considered a better gauge of
labor market health, increased by 67,000.[]
The euro traded at $1.2878 <EUR=>, up 0.4 percent. It also
gained 0.6 percent to 108.77 yen <EURJPY=>.
The dollar earlier rallied more than 1 percent to a session
high of 85.22 yen <JPY=>, according to Reuters data. But it
pared most gains after the weaker-than-expected ISM services
data and last traded up 0.2 percent at 84.47 yen.
The dollar hit a 15-year low of 83.58 yen on electronic
trading platform EBS late last month as fears the U.S. economic
recovery was stalling pushed U.S. Treasury yields lower.
Investors have been reluctant to push the yen much higher
after Japanese authorities said they could take action --
normally a code word for intervention -- to stem yen strength.
The euro jumped 0.9 percent to 1.3108 Swiss francs
<EURCHF=>, off an all-time low around 1.2850 earlier this week.
The dollar rose 0.5 percent to 1.0176 francs. <CHF=>
"The yen and Swiss franc are both down against the
greenback, a 'text-book' example of a slip in safe-haven
support," said Nick Bennenbroek, head of currency strategy at
Wells Fargo in New York.
CAUTION REMAINS
Expectations of a Federal Reserve rate hike next year grew
after the jobs data. Traders now see about a 68 percent chance
the Fed will increase its target interest rate at its Sept 2011
meeting, fed funds futures showed. []
The dollar had come under pressure in recent sessions as
speculation of more quantitative U.S. easing gained ground
following a raft of weak numbers. Fed Chairman Ben Bernanke has
said he is prepared to ease monetary policy further if the U.S.
economic slowdown worsens.
While the jobs report might mitigate fears of a double-dip
recession, some analysts cautioned that the U.S. economy is
still in for a slow recovery.
"Just as trading on the bad U.S. data recently was
overdone, I think sentiment on this week's positive reports is
also going to be overdone," said Fabian Eliasson, vice
president of currency sales at Mizuho Corporate Bank in New
York. "You have a lot of people unemployed, so it's a long way
back to normal."
An increase in risk appetite lifted commodity currencies.
The Australian dollar rose 0.6 percent to US$0.9158 <AUD=>,
while the New Zealand dollar climbed 0.8 percent to US$0.7205
<NZD=>.
The Canadian dollar hit a two-week high, with the greenback
falling 1.1 percent to C$1.0412 <CAD=>.
(Additional reporting by Nick Olivari and Steven C. Johnson;
Editing by Dan Grebler)
