* Euro breaks $1.36, hits six-week high versus dollar
* US payrolls data fuel hopes of economic recovery
* US loses 539,000 jobs in April, fewer than expected
(Updates prices, adds comment, details, changes byline)
By Wanfeng Zhou
NEW YORK, May 8 (Reuters) - The dollar fell to a six-week
low against the euro on Friday after a better-than-expected
U.S. jobs report bolstered hopes the global recession may be
easing and dented safe-haven demand for the greenback.
The euro broke above $1.36 after government data showed
U.S. employers cut 539,000 jobs in April, the fewest since
October. While still high, that was not as bleak as financial
markets had expected. For full story, see []
The jobless rate hit a 25-year peak of 8.9 percent,
tempering some optimism, but a rally in stocks and a bevy of
improved global data this week kept risk appetite high.
The dollar tends to suffer when risk sentiment improves as
investors feel they no longer need to buy it as a safe haven.
"The economy is still very weak, but ... there's lots of
other evidence that the economy is not as bad as it was at the
end of last year and the beginning of this year," said Robert
Blake, senior currency strategist at State Street Global
Markets in Boston. "Now it's more like just a really bad
recession instead of a depression or something."
"The repatriation had boosted the dollar during the height
of the panic," Blake said, adding now "the safe-haven bid for
the dollar is unwinding."
In afternoon trading, the euro <EUR=> last traded up 1.4
percent at $1.3576 after hitting a session peak of $1.3601 --
its highest since March 26, according to Reuters data. The
euro-zone currency has gained 2.3 percent this week, en route
to its best weekly performance since late March.
The euro was also boosted this week on hopes that the
European Central Bank's plan to boost credit through purchases
of covered bonds -- which are backed by a pool of assets that
remain on a bank's balance sheet -- would help the ailing
European economy.
The dollar dipped 0.6 percent to 98.62 yen <JPY=> while
sterling rose 0.9 percent to $1.5161 <GBP=>.
Hopes that the world has already endured the worst of the
recession have boosted stock markets and risk appetite in
recent weeks, putting pressure on the dollar.
It fell to a six-week low against a basket of major
currencies with the U.S. Dollar Index <.DXY> off 1.6 percent at
82.563 and was on track for its third consecutive weekly
decline.
"The market is positioning for recovery over the next few
months, which means the dollar will clearly see considerable
weakness as this plays out," said Melvin Harris, chief market
strategist at Advanced Currency Markets in New York.
But analysts warned that the global economy was still mired
in recession and faced a number of threats. On Thursday, U.S.
regulators said 10 of the country's biggest banks must raise
$74.6 billion in equity to shore up their capital cushions.
[]
"While the economy may be getting worse at a slower rate,
it is still in recession and unemployment is rising," Mizuho
Corporate Bank currency strategist Nicole Elliott wrote in a
note to clients, adding the markets may have to face "the
possibility of things not getting significantly worse but not
improving much either for a very long time."
