By Masayuki Kitano
TOKYO, March 10 (Reuters) - The dollar slipped back towards a
record low against the euro and an eight-year low versus the yen
on Monday, after surprisingly weak U.S. jobs figures heightened
concern the U.S. economy may have fallen into recession.
The dollar took a beating on Friday after data showed U.S.
employers unexpectedly cut 63,000 non-farm jobs in February, the
steepest rate of job cuts in nearly five years. []
The news heightened worries that the U.S. economy had slipped
into recession and sent the dollar tumbling to record lows
against the euro, the Swiss franc and a basket of major
currencies, and to eight-year troughs versus the yen.
"There seems to be no change to the medium- and longer-term
trend of selling the dollar," said Akira Kato, a senior manager
in Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading
department.
Concerns about a U.S. recession and the subprime mortgage
crisis as well as the outlook for interest rate differentials are
likely to keep the dollar under pressure, Kato said.
The dollar fell around 0.6 percent from late U.S. trading on
Friday to 102.16 yen <JPY=>, but held above an eight-year low of
101.40 yen struck on electronic trading platform EBS on Friday.
The euro rose 0.2 percent to $1.5380 <EUR=>, edging back
towards a record high of $1.5465 hit on EBS late last week.
The dollar fell broadly and slipped 0.5 percent against the
Swiss franc to 1.0206 francs <CHF=>, nearing an all-time low of
around 1.0135 francs hit on Friday.
The dollar index, which measures the dollar's value against a
trade-weighted value of major currencies, fell to 72.828 <.DXY>,
edging back towards a record low of 72.462 hit on Friday.
Falls in U.S. share prices on Friday and the downbeat jobs
data prompted interbank dealers to sell the dollar against the
yen on Monday, said Bank of Tokyo-Mitsubishi UFJ's Kato.
The Standard & Poor's 500 index <.SPX> fell on Friday to its
lowest close since August 2006.
EYES ON FED
But dollar buying by Japanese importers and short-covering
interest at levels near 102.00 yen helped limit the dollar's
decline on Monday, Kato said.
Market players said the dollar could fall below 100 yen by
the end of March, although such a decline seemed more likely to
occur later in the month rather than imminently.
A fall below 100 yen would take the dollar to its lowest
levels since late 1995.
"The U.S. economy could continue to worsen and the Fed may
have to keep cutting interest rates," said Masafumi Yamamoto,
head of foreign exchange strategy Japan for Royal Bank of
Scotland.
"It is still not a situation that calls for dollar buying,"
Yamamoto said, adding that declines in U.S. payrolls and housing
prices could depress consumer spending.
The Federal Reserve's announcement of steps to inject more
funds into the banking system to ease persistent liquidity
strains led to some buybacks of the dollar on Friday.
The Fed's steps included a decision to increase the size of
its two auctions of short-term funding to banks this month to
$100 billion from the $60 billion previously announced.
The Fed's fund injection plan tempered the most aggressive
bets on possible Fed rate cuts this month.
The implied probability for the Fed to lower interest rates
by a full percentage point this month rose to around 25 percent
after the jobs data on Friday, but later receded.
Investors still expect the Fed to cut interest rates by 75
basis points from 3 percent this month, however. <FEDWATCH>
The European Central Bank kept interest rates steady at 4
percent last week to fight inflationary pressures, and a Reuters
poll of economists showed no forecasts for an ECB rate cut in
April. []
(Additional reporting by Rika Otsuka)
