US dollar drops against euro, yen ahead of jobs report

The US dollar fell against the euro Thursday despite sharp interest rate cuts by the European Central Bank, dealers and experts said, citing nervousness ahead of the release of new US job loss statistics. The euro rose slightly to 1.2776 dollars around 2200 GMT from 1.2704 dollars in New York on Wednesday as the markets braced for Friday's employment report for November. The greenback also dropped to 92.20 yen from 93.29 yen a day earlier. The euro dipped as well -- to 117.81 yen from 118.55 on Wednesday. The dollar "likely came under pressure due to position adjustments resulting from the ECB (European Central Bank) signaling a pause and the risk leading up to tomorrow's nonfarm payrolls number," said Michael Woolfolk of the Bank of New York Mellon. "It appears that the brutal moves seen recently in foreign exchange markets have subsided for the time being, with the US dollar settling into a range against the euro," he said. Woolfolk suggested that the dollar's movements Thursday were largely dictated by US economic concerns rather than the European interest rate cuts. Leading European central banks took historic action Thursday to ward off spreading recessions, slashing their key lending rates to boost businesses and consumers. The European Central Bank cut the benchmark cost of borrowing by a record 0.75 percentage points to 2.50 percent as the 15-nation eurozone struggled with its first recession. The Bank of England returned British interest rates to levels last seen in World War II and its immediate aftermath with a full point reduction to 2.0 percent. Interest rates last stood at this level in 1951. For the ECB, it was also an unprecedented third rate cut in two months, following a coordinated reduction with other central banks on October 8 and another move in early November. ECB president Jean-Claude Trichet acknowledged here that his bank's staff expected the eurozone economy to shrink by 0.5 percent next year and that the contraction could reach 1.0 percent. Kathy Lien of Global Forex Trading said that if November US nonfarm payrolls to be released Friday fell by more than 375,000, it would be initially negative for the US dollar. "But when the US stock market opens, we could see the dollar rally," she said. "Traders need to remember that the dollar is appreciating not because of the strength of the US economy, but because money flocks into low-yielding currencies during a global recession," she said. Most analysts expect the government to announce 325,000 jobs lost in November and the jobless rate rising to 6.8 percent from 6.5 percent in October. As British interest rates fell to the lowest level in more than half a century amid mounting evidence Britain faces a deep recession, the pound dropped to 1,4672 dollars on Thursday from 1.4769 dollars in New York trading a day earlier. But the dollar fell to 1.1955 Swiss francs from 1.2103 Swiss francs on Wednesday.