NEW YORK (Dow Jones)--The euro tumbled to its weakest level in more than a month against the dollar on Thursday, briefly slipping below $1.30, as optimism about the U.S. economic recovery spurred investors to sell the single currency.
With Wednesday's surprising jump in U.S. private-payrolls data for last month as a backdrop, the dollar has been underpinned by growing expectations that Friday's widely watched U.S. nonfarm payrolls report will show improvement in long-stagnant labor markets. Other data have reflected an increasingly vigorous economic expansion in the U.S., although sustained job creation has largely failed to materialize.
"Certainly I think it's tough to build any long euro positions heading into tomorrow's job numbers," said Joe Manimbo, senior market analyst at Travelex Global Business Payments.
Long positions are bets that an asset will rise in value, while short positions are bets that assets will depreciate.
"Signs the U.S. labor market is showing improvement could spur chatter that the [Federal Reserve] might not need to buy assets ... which had been at heart of [the] dollar's decline," he added.
Late Thursday afternoon, the euro was at $1.3009 from $1.3150 late Wednesday, according to EBS via CQG. The dollar was at Y83.36 from Y83.25, while the euro was at Y108.40 from Y109.47. The U.K. pound was at $1.5471 from $1.5514. The dollar was at CHF0.9655 from CHF0.9660.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.825 from about 80.216.
On the defensive against the surging dollar, the euro dropped below its 200-day moving average, which most analysts put around $1.3180, before dipping further below the psychologically key $1.30 mark for the first time since Dec. 1.
A much stronger-than-expected U.S. non-farm payrolls report on Friday--estimates point to a gain of 150,000 jobs--would likely see the dollar speed its gains against its rivals, especially the battered euro, which struggles with worries over the region's sovereign debt.
"If it's a real gangbusters number, like upwards of 300,000" added jobs, the euro could test the low $1.29s, said Paresh Upadhyaya, director of G10 foreign-exchange strategy for BofA Merrill Lynch in New York.
And if the figure disappoints significantly, "obviously we could be higher again in euro-dollar," said Jane Foley, senior foreign exchange strategist at Rabobank in London.
To see the euro's performance against the dollar, please see:
http://www.dowjoneswebservices.com/chart/view/5214
Meanwhile, analysts remain unconvinced that the euro zone's woes are behind it, as concerns over sovereign debt in the 17-nation currency bloc continue to hurt the single currency.
Fresh concerns about the euro zone were twofold Thursday, said analysts. The euro zone's sovereign default insurance cost hit its highest level ever, according to Markit. Notably, Belgium was the worst performing index constituent measured by the percentage change in its five-year credit-default swap spreads, which widened 17 basis points to 240 basis points, as the country appeared to be no closer to forming a government. Also, concern about a potential move by the European Union to spread bailout costs to senior bond holders has pushed banks to be more reluctant to lend to each other, traders said. That was reflected in the two-year U.S. swap spread widening to a level last seen in mid-December.
"One of the reasons we have seen the euro selling is that we continue to see CDS spreads widening," said Kathy Lien, director of currency research at GFT Forex in New York. "That, combined with talk of euro bondholders sharing the burden of a bailout, is having a large impact on the euro," she said.
-By Andrew J. Johnson and Bradley Davis, Dow Jones Newswires; 212-416-3092; andrewj.johnson@dowjones.com
