RPT-FOREX-Dollar up vs euro, down vs yen on weak US jobs data
Dollar rises vs euro, falls vs yen after jobs data * ECB holds key rate at record low 1.0 percent as expected * New orders for U.S. manufactured goods rise in May * China quells FX reserves speculation, supports dollar (Adds analysts' comments, detail about U.S. jobless rate and more on China official's remarks)
NEW YORK, July 2 (Reuters) - The dollar rose versus the euro and fell against the yen on Thursday as a report showing a larger-than-expected drop in U.S. non-farm payrolls in June, renewed concerns about the economic recovery's pace.
U.S. Treasury bonds rose and U.S. stocks fell as the data raised risk aversion, enhancing the dollar's safe-haven appeal.
Analysts said demand for the euro also fell after European Central Bank President Jean-Claude Trichet said euro-zone activity would likely remain weak for the rest of the year.
The ECB left its benchmark refinancing interest rate at a record low of 1 percent, as expected. Trichet said stabilization in 2010 would be followed by a recovery. For details, see [ID:nL2512532].
"The weak jobs report reinforced a trend already in place in the forex market prior to the release, that is, that the dollar was oversold," said Camilla Sutton, a currency strategist at Scotia Capital, in Toronto.
"Euro/dollar has been stuck in a range and with weak data like today's, the euro will not get the support to break through $1.42," she added.
In late morning trading in New York, the euro was down 1 percent at $1.3998 EUR=, retreating from $1.4201 hit on Wednesday, its highest since early June. The dollar slipped 0.6 percent to 95.99 yen JPY=EBS, after trading as high as 96.89 yen before the jobs report.
U.S. JOBLESS RATE NEAR 26-YEAR HIGH
U.S. employers cut 467,000 jobs in June, far more than expected, while the unemployment rate rose to almost a 26-year high of 9.5 percent, the government said. The report showed the country's labor market is still struggling with a deep recession. [ID:nN01210643]
"If you were banking on the U.S. driving a vigorous recovery, think again," Alan Ruskin, chief international strategist at RBS, said in a note. "The employment report can largely be taken at face value, and the face value story is a labor market that is not improving nearly as rapidly as the May data suggested."
Another report showing new orders for U.S. manufactured goods jumped 1.2 percent in May had limited impact on the foreign exchange markets. [ID:nN0220084]
Traders said volume is expected to dwindle this afternoon before the three-day weekend for the Independence Day holiday in the United States. Financial markets will be closed on Friday and will re-open on Monday.