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US Dollar, Japanese Yen Up as Disappointing NFPs Add to Risk Aversion

Thursday, 02 July 2009 12:41:51 GMT  |  Roman Kadinsky, DailyFX Research

The release of deeply disappointing US non-farm payroll results, which fell by 467K in June versus expectations of a decline of 365K, has triggered quite a bit of volatility for the US dollar, but the Japanese yen has ultimately been the biggest gainer this morning as risk aversion has sent FX carry trades and US stock market futures tumbling close to 1.5 percent.

Equity index futures are down approximately one percent, while commodities pull back and dollar appreciates, as risk aversion sees renewed vigor on the back of US jobs data. Non-farm payrolls, normally scheduled for release on Friday but adjusted for the July 4 holiday, came in significantly worse than expected for June. The measure showed a net loss of 467,000 with the previous 345,000 having seen a better revision to a loss of 322,000. Economists forecast by Bloomberg had expected the figure to rise, but by a smaller amount to 367,000. Unemployment rate climbed to 9.5%, the highest since 1983. Declines in the manufacturing sector narrowed to 136K from 156K in May. Initial jobless claims reported this morning 614K new filings in the week ended June 27. The figure came relatively inline with estimates but marks the22nd week of more than 600K in the release. Continuing claims, meanwhile, fell to 6702K from 6755K. At the same time, emergency benefit rolls only climbed by 8,000 to 2.437 million.

Non-Farm Payrolls

Also showing grim sentiment were earnings indicators. Average hourly earnings posted no change from the previous month while the annualized figure cooled to 2.7% from a 3.0% pace, the sixth monthly decrease and noticeably lower than expectations for 2.9% growth. Worse was the figure of average weekly hours worked, which fell to 33 hours, the lowest level since recording began in 1964, as employers continue to cut back on production. Such figures are likely to reflect in personal income in the months ahead, despite a recent rise of 1.4% in part due to government stimulus.

On the currency front, the dollar has seen appreciation following the report while the Japanese yen has climbed the most among the major currencies. Seeing considerable weakness were the AUD/USD, which just dipped below 0.80 and NZD/USD, down the most of the seven major crosses.

Relative Performance of US Dollar Crosses

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