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Euro rises to near four month peak

Friday, September 07 14:49:42

The euro touched a near four-month peak against the dollar today after a report showed a smaller-than-expected rise in U.S. nonfarm payrolls in August, setting the stage for the Federal Reserve to pump additional money into the sluggish economy.

Investors were sharply focused on the data for hints on whether the Fed will launch another round of bond-buying, known as quantitative easing, after its policy meeting next week and market reaction was immediate.

Nonfarm payrolls increased only 96,000 last month, the Labor Department said today.

The unemployment rate dropped to 8.1 percent from 8.3 percent in July but this was largely due to Americans giving up the search for work. The lacklustre report keeps the pressure on U.S. President Barack Obama ahead of the November vote in which the health of the economy looms large.

"This weak employment report, in jobs, wages, hours worked and participation is probably the last piece the Fed needs before launching another round of quantitative easing next week," said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.

"QE will boost equities, damage the dollar and do little for the economy, but what else can an activist Fed do? " The euro rose as high as $1.2777, its highest since late May, knocking out reported option barriers at $1.2660 and $1.2700. It last traded at $1.2773, up 1.1. percent.

The euro was already higher before the U.S. jobs report as investors cheered the European Central Bank's plan announced on Thursday to lower borrowing costs for Spain and Italy. ECB President Mario Draghi, backing up his promise to do whatever it takes to preserve the euro, unveiled a new and potentially unlimited bond-buying program aimed at lowering painfully high borrowing costs for stressed member states. (C ) Reuters