US Jobless Claims Raising Concerns

By: Hillel Fuld

The USD was on the defensive close to a a 3-½ month low versus a variety of currencies after poor U.S. jobless claims figures raised worries that Friday's payroll data could paint a sad picture of the U.S. economic recovery.

A negative reading could fuel rumors that the Federal Reserve may consider additional easing steps as early as next week, which could increase pressure on the greenback particularly against the Japanese coin, given the pair's recent strong correlation with U.S. Treasury yields.

"Unless employment improves, housing demand won't improve and consumption won't grow. The U.S. economy could hit a lull," said Kakuya Kojoh, head of the securities department at Nissan Century Securities.

Versus the JPY, the dollar traded at 86.08 Yen, up 0.3 percent on the day and more than one yen above its November low of 84.82 yen, a break which would take it to a 15-year low.

Some covered short dollar positions vs the Yen before the U.S. employment data, traders said.

"The market is focusing on the outlook for the U.S. economy. If the dollar breaks below the November low, it could enter a whole new world," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Morgan Stanley Securities.

Traders said there was a sizable volume of knockout option positions under 85 yen, which suggests that the dollar's fall could become more volatile if it does reach those price levels.

While further JPY gains could stir talk of yen-selling intervention by Japanese authorities, many market players think Tokyo is unlikely to pull the trigger any time soon.

For now the USD has some support at 85.32 yen, its low on Wednesday.

The EUR fetched $1.3179, keeping much of Thursday's rise of about 0.3 percent. Now not far off its three-month high of $1.3262 hit earlier in the week, the currency has immediate support around $1.3105-25, a previous resistance area.

U.S. JOBS IN FOCUS

The dollar index .DXY stood at 80.84, little changed from late U.S. trade and near its Tuesday low of 80.469, its lowest since mid-April.