Published: Thu, 02 Apr 2009 22:47:29 +0200

Traders Hesitant to Short U.S. Dollar Ahead of Friday's NFP Report

(CEP News) U.S. dollar bears could be a little hesitant to look for further losses in the greenback ahead of Friday's nonfarm payrolls report.

The U.S. dollar was under extreme pressure Thursday as U.S. equity indexes showed almost 3% gains across the board. The U.S. dollar index lost a full point on the day, closing at 84.446. The greenback gave back most of the gains it has made since March 27.

Investors on Thursday morning were eager to move away from the U.S. dollar and back into higher yielding currencies following positive news from the G20 meeting and changes in the mark-to-market accounting system.

The U.S. Financial Accounting Standards Board voted to ease rules that force financial institutions to value assets at whatever the market is willing to pay. The board gave banks "significant" judgment in valuing their assets.

At the G20 meeting, the member nations pledged to stimulate their economies and recapitalize the IMF.

However, Friday's nonfarm payrolls could provide some risk to Thursday's momentum. Economists expect the report from the Bureau of Labor Statistics (BLS) to reveal 660,000 job losses in March, against 651,000 jobs lost in February, marking the fifth straight month of over half a million job losses.

John Sidawi, senior FX trader at Federated Investment management, said he does not think a 600,000 job loss will surprise the market.

"I think if we get 400,000 the markets will tear higher," he said. "We will see a major selloff in the U.S. dollar."

Traders say the whisper number, or unofficial consensus, is for the data to show a 700,000 loss in the job market and for the unemployment rate to rise to 8.7%.

Looking at EUR/USD, the cross could move higher on Friday following a smaller-than-expected job loss report, according to Steve Butler, director of currency trading at the Bank of Nova Scotia.

"I think we just ran out of momentum today. We had a nice run from 1.32 USD to 1.35 USD and I think we could head back to 1.37 USD on Friday," he said.

"We know that the employment is going to be bad so there isn't going to be much surprise there."

However, he added, the market right now is lacking any "follow through." Even if EUR/USD hits 1.37 USD in a knee-jerk reaction following the data, Butler said there is a risk that it falls back down to the 1.30 USD level.

"I think you have to look at the broad range we are suck in, and I think we will continue to trade between 1.38 (USD) and 1.31 (USD)," he said.

Euro/USD up 2.12 cents to 1.3461

USD/CAD down 2.26 cents to 1.2374

USD/Yen up 0.93 points to 99.46

GBP/USD up 2.65 cents to 1.4733

AUD/USD up 1.66 cents to 0.7159

Euro/Yen up 3.36 points to 133.87

Euro/GBP down 0.22 pence to 0.9137

GBP/CAD down 0.04 cents to 1.8230

CAD/Yen up 2.19 points to 80.37

Euro/CAD down 0.38 cents to 1.6658

The U.S. Dollar Index is down 1.06 points to 84.45

All data taken at 4:44 p.m. EDT.

By Neils Christensen, neilsc@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca