FOREX-'Flash crash' hits sterling; US jobs data weaken dollar
New York (Oct 7) Sterling tripped lower on Friday on what traders called a "flash crash" that knocked the currency to a 31-year low, while the dollar slipped on news of unexpectedly weak U.S. job growth in September.
Even before a sudden plunge that briefly shaved off a tenth of the pound's value during Asian trading, sterling was headed for its worst week since January 2009 as some national leaders called for Britain to make a "hard" exit from the European Union in which it would leave the single market.
"I think it's a warning shot from the markets to the UK about what type of potential volatility in sterling we may see down the line," said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York.
On Friday, the pound plunged about 10 percent from levels around $1.2600 to $1.1378 in a matter of minutes in thin early Asian trading.
Thomson Reuters later revised that low to $1.1491, which was still the weakest level for sterling since 1985. The company, which owns the Reuters foreign exchange brokerage platform RTSL, said an outlying trade had been cancelled. Sterling retraced to $1.2450 in U.S. trading, which was still down 1.3 percent on the day.
The pound pared earlier losses as other major currencies strengthened against the dollar in reaction to a U.S. government report that showed nonfarm payrolls rose 156,000 in September, below the 175,000 increase forecast among analysts polled by Reuters. "The market was looking for an upside surprise so it was a bit of a disappointment," said Jeremy Cook, head of currency strategy at World First in London.
The dollar index was last down 0.1 percent at 96.682. It rose to a more than two-month high shortly before the release of the payrolls report.
The greenback fell hard against the yen, losing as much as 1 percent after the jobs data. It was last down 0.7 percent at 103.17 yen. The euro rose 0.2 percent to $1.1174 but fell 0.7 percent to 115.22 yen. Encouraging aspects of the September payrolls report, which showed a higher participation rate and steady 0.2 percent rise in wages, limited the dollar's loss and supported market expectations the Federal Reserve would raise interest rates at its Dec. 13-14 policy meeting.
"It was steady, not a flashy report. It's changed very little on people's mind about a December rate hike," World First's Cook said.
Currency bid prices at 11:08AM (1508 GMT) Description Last U.S. Close Pct Change YTD Pct
Source: Reuters
