NEW YORK: The dollar rallied broadly on Friday and reached its highest level against the yen in more than 10 months as a solid US payrolls report highlighted a growing disparity with struggling economies in other regions of the world.
US data showed employment in February grew solidly for a third straight month, a sign the economic recovery was broadening and in less need of further monetary stimulus from the Federal Reserve.
The euro tumbled more than 1 percent against the dollar after the jobs report and was already under pressure as concerns about heavily indebted euro zone states and a weak growth outlook outweighed relief that Greece completed a bond swap that should avert an uncontrolled default.
"The dollar is doing well across the board and surprisingly well against some of the commodity-based currencies. What we're seeing with the euro is a reflection of the euro zone's monetary stance and economic outlook," said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York.
"We're getting steady improvement in the US while the European economic situation remains challenging."
Growth has been slowing in China and the euro zone appears to be sliding into recession. The jobless rate in the 17-nation euro zone area rose to 10.7 percent in January, the highest since the euro started circulating in 2000.
The dollar leaped to 82.36 yen after the US jobs report, its highest since April 2011. It last traded at 82.26, up 0.9 percent on the day, according to Reuters data. Along with the jobs data, expectations for further monetary stimulus in Japan continued to knock the currency down.
The euro hit a trough of $1.3122 and last traded at $1.3138, down 1.1 percent on the day.
Trading activity, however, was moderate and many market participants were still sitting on the sidelines, according to Michael Woolfolk, currency strategist at BNY Mellon in New York.
"I think there is cautious optimism, but I think the European debt crisis is one of the factors that's keeping people from going all in."
Despite the jobs data, US Federal Reserve Chairman Ben Bernanke will likely keep monetary policy accommodative, Woolfolk said.
"I think he's playing a game of chicken essentially with inflationary risks right now. We'll see who blinks. I don't think he will blink"
Other analysts said Greece still weighed. "The problems for Greece are still there and in the short term the euro could suffer from this ... On a one-month horizon you could see the euro below $1.30," said Asmara Jamaleh, currency strategist at Intesa Sanpaolo in Milan.
Greece won 85.8 percent acceptance from private creditors for a bond swap deal that will ease its massive public debt and clear the way for a new international bailout.
"We think Portugal is largely ring-fenced but Spain could be a bigger problem," said Geoffrey Yu, currency strategist at UBS, who targeted a move toward $1.25 in the euro in three months' time. He said that was based mainly on a relative growth view.
Representatives of the European Commission have been in Spain to evaluate its 2011 budget deficit, which came in much higher than expected, while the country has defied the European Union and softened this year's budget deficit target.
Also in focus, the International Swaps and Derivatives Association said it was meeting at 8 a.m. EST (1300 GMT) to decide whether Greek credit default swaps will be paid out.
"The base case assumes that this CDS event is well telegraphed and will not trigger stress in the market, although there may be some doubts as to whether those that wrote the protection can pay. We think uncertainty around the CDS event requires a small risk premium in the euro," said ING in a note.
In a statement following closure of the offer late Thursday, the Greek finance ministry said 172 billion euros in total had been tendered for the deal, which will force investors to take losses of as much as 74 percent on their holdings.
It told international partners it intends to use clauses that will force any holders of the outstanding 177 billion euros of bonds regulated under Greek law to accept the deal.
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