Dollar gains on euro despite bad jobs data

NEW YORK: The dollar shrugged off bleak US jobs data to gain on the euro Friday, helped by worrisome news on Italy's economy and banking system.

The euro was trading at $1.4258 at 2100 GMT Friday, down from $1.4356 a day earlier.

The dollar fell against the Japanese currency, buying 80.55 yen from 81.20 the day before.

Fears the eurozone debt crisis would spread to Italy held the greatest sway over trade.

Traders sold off Italian debt and Italian banking stocks as they worried about the possibility the country would be undermined by the same debt concerns hitting Greece, Portugal and Ireland.

"It's been volatile and the market is still reluctant to buy euros given the potential for negative headlines coming from any eurozone official or the rating agencies," said Ray Attrill of BNP Paribas.

"It's a safe-haven flows by dollar-based investors back into the dollar," he explained.

"Italian debt is seriously under attack while until now it had been seen as one of the least volatile" among the weaker countries in the eurozone, Cyril Regnat, bond strategist at Natixis, told AFP.

"We're in a scenario of panic," he said.

The dollar did take a short-lived hit after the Labor Department released a dismal June jobs report.

The economy generated a paltry net 18,000 jobs, lower than May's poor 25,000 figure, signalling that things were not picking up at the end of the second quarter as economists had hoped.

The unemployment rate ticked up to 9.2 percent, and the data showed declining incomes, an indication of weakening consumer spending power.

While the dollar later rebounded, traders warned of the underlying weakness the jobs numbers signalled for the greenback.

"Today's report will make the central bank much more worried about the outlook for the US economy," warned Kathy Lien of currency specialists GFT.

"If next month's jobs number fails to rebound, then the possibility of more stimulus could become a reality. Between now and then, investors will be very weary of holding dollars," she said.

The dollar fell to 0.8368 Swiss francs (0.8444) while the British pound edged up to $1.6048 ($1.5973).

Copyright AFP (Agence France-Presse), 2011