Euro falls, Brown turmoil hits pound

By AFP

July 15, 2010 Updated Jun 8, 2009 at 2:01 PM CDT

The euro sank against the dollar on Monday as traders digested an encouraging US jobs report and a credit downgrade for Ireland, while British political turmoil threw the spotlight on the pound.

In late London trade, the European single currency fell to 1.3867 dollars from 1.3970 in New York late on Friday.

The euro had plunged as low as 1.3806 dollars earlier after international ratings agency Standard and Poor's cut eurozone member Ireland's long-term sovereign credit rating and maintained its negative outlook.

Ireland's finances have been savaged by a costly rescue package for the banking sector.

Against the Japanese currency, the dollar recovered and rose to 98.64 yen from 98.62 yen on Friday.

The dollar had unexpectedly risen Friday after the US Labor Department said the number of job losses slowed to 345,000 from 539,000 in April, although the jobless rate surged to 9.4 percent in May.

The data, seen as one of the best indicators of economic momentum, offered conflicting signals about a weak labour market where the pace of massive job cuts is easing, a positive sign for the recession-battered economy.

"The report showed that far fewer jobs were lost in May than even the most optimistic analysts had predicted," said Commerzbank analyst Antje Praefcke.

"Even despite the fact that the unemployment rate came in slightly above expectations, the report was clearly good news for the US economy."

The dollar's rally fuelled speculation of an earlier-than-expected US interest rate hike but market players remained cautious over the outlook, dealers said.

In Britain, sterling recovered to stand around Friday's closing level against the dollar in late trading, reversing an earlier fall as ongoing political uncertainty plagued the currency.

Prime Minister Gordon Brown was clinging to power on Monday after European elections which saw his party suffer one of its worst defeats on record and historic gains for the far-right.

"The weakness posed by the Gordon Brown government will continue to keep sterling under pressure," said analysts at BNP Paribas in a note to clients.

"Only if Brown announces early elections would we see a temporary boost to the pound."

Brown's Labour Party was beaten into third place behind the previously fringe anti-Europeans of the United Kingdom Independence Party, leaving him fighting for his job days after 11 of his ministers resigned.

Elsewhere, the yen remained pressured after official data showed Monday that Japan's current account surplus in April fell by more than half from a year earlier as exports slumped further.

In London trading late Monday, the euro was changing hands at 1.3867 dollars against 1.3970 dollars late on Friday, at 136.78 yen (137.80), 0.8679 pounds (0.8741) and 1.5164 Swiss francs (1.5172).

The dollar stood at 98.64 yen (98.62) and 1.0935 Swiss francs (1.0860).

The pound was at 1.5976 dollars (1.5974).

On the London Bullion Market, the price of gold dropped to 943.75 dollars an ounce from 962 dollars an ounce late on Friday.

- Dow Jones Newswires contributed to this report -

To submit a comment on this article, your email address is required. We respect your privacy and your email will not be visible to others nor will it be added to any email lists.