CURRENCIES: Dollar Little Changed Ahead Of Jobs Data; Pound Drops

http://www.djnewswires.com/eu CURRENCIES: Dollar Little Changed Ahead Of Jobs Data; Pound Drops

By Wanfeng Zhou

The dollar traded little changed against the euro and Japan's yen early Thursday, as foreign-exchange traders and the financial markets in general played it safe on the eve of the release of pivotal U.S. nonfarm payrolls data.

Economists polled by MarketWatch are expecting growth in nonfarm payrolls of about 168,000. The Labor Department will release the report on Friday at 8:30 a.m. Eastern time.

"With much of the world in for a long weekend and U.S. March nonfarm payrolls posing a notable event risk on Friday, major currencies were largely range-bound," said David Watt, senior currency strategist at RBC Capital Markets.

In early New York trading, the dollar was quoted at 118.82 yen, compared with 118.68 yen late Wednesday. The euro stood at $1.3383, compared with $1.3369.

The British pound traded at $1.9681 vs. $1.9754. The dollar changed hands at 1.2185 Swiss francs, compared with 1.2196 francs.

The euro fetched 159 yen, compared with 158.66 yen.

The dollar registered little reaction to Thursday's Labor Department report showing weekly initial U.S. jobless claims rose by 11,000 to stand at 321,000 for the week ended March 31, their highest level since March 3.

Bank of England holds

The British pound dropped after the Bank of England earlier Thursday left the cost of borrowing unchanged at 5.25% for the third month in a row. The decision was in line with expectations of the majority of economists.

A significant minority, however, had been looking for an immediate rate hike after inflation ticked higher in February and other data showed activity in the services sector had edged up in March.

The central bank surprised the market with a rate hike in January -- its third since the summer of 2006 -- as it struggled to keep a lid on inflation.

But at its last meeting in March, the Bank of England's monetary-policy panel voted 8 to 1 to hold steady on rates, with the lone dissenter actually calling for a rate cut amid volatile stock-market conditions.

The central bank's decision Thursday is widely seen as a temporary pause before another rate hike in May.

"It looks like the markets will have to wait another month," said David Brown, economist at Bear Stearns, in a note.

"The next rise should be linked in to the publication of the next Bank of England inflation report in May," he said. "The Bank of England's inflation hackles are up and the tightening bias remains intact."

Also weighing down the pound Thursday were data showing U.S. manufacturing production fell 0.6% in February from January while total industrial production slipped 0.2%. The figures were much weaker than expected.

Fresh action in China

Elsewhere, China's central bank announced Thursday it will boost mainland banks' reserve-requirement ratio by 50 basis points effective April 16.

The move is the sixth increase in the past 10 months and follows a hike of 27 basis points in short-term interest rates on March 18.

Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York, said these market measures may "be designed to demonstrate to the rest of the world that Beijing is making concerted efforts to slow growth, rather than enjoying a free lunch at the expense of its western trading partners."