SYDNEY: The dollar struggled against a basket of major currencies early in Asia on Monday after failing to get a boost from data showing a rebound in US jobs, while the euro stayed supported on expectations of an interest rate hike next month.
The closely watched non-farm payrolls report on Friday showed an increase of 192,000 jobs as private employers hired 222,000 workers, the most since April. That took the jobless rate down to a nearly two-year low of 8.9 percent.
"The market was prepared for a mammoth home run and an arms-raised victory lap. What it got was some good solid contact that resulted in a single base hit. Still good, but a bit disappointing given the pre-payrolls hype," said David Watt, strategist at RBC Dominion Securities.
Strong jobs growth is seen necessary for the Federal Reserve to end its second round of quantitative easing, which is equivalent to easing interest rates.
In contrast, the inflation-wary European Central Bank flagged last week that it could raise interest rates as early as next month, a far more hawkish tone than what many in the markets were prepared for.
Even ahead of the ECB and US jobs numbers, currency speculators had boosted bets in favor of the euro and raised bets against the dollar.
The dollar index, which tracks its performance against a basket of major currencies, edged down 0.05 percent to 76.360, holding not far from a four-month trough of 76.275 set last Friday.
Against the yen, the dollar traded at 82.28, having fallen from Friday’s session high around 83.00. However, good support is seen around 81.60, a level that held after several tests in late February and early March.
The euro was at $1.3991 after briefly popping above $1.40 for the first time since November 8. This has put the November high of $1.4283 within sight.
"Despite signs of a recovery in the U.S., the Fed will continue to fight growth risks while the ECB will fight inflation risks," BNP Paribas analysts wrote in a report.
"With the ECB signaling a rate hike in April to alleviate inflationary pressures, EUR/USD should remain well-supported as interest rate differentials work in favor of EUR."
The New Zealand dollar, however, remained a major underperformer as markets were braced for an interest rate cut by the Reserve Bank of New Zealand on Thursday.
Some market players expect the RBNZ to cut by as much as 50 basis points in an attempt to cushion the economy from the effects of the devastating earthquake, which the Treasury has estimated will cost up to $15 billion.
"There is a bit of kiwi selling this morning. I personally think there’ll be a rate cut, but our economists are saying no. I’m happy to sell any kiwi rallies," a trader at a U.S. investment bank said.
Markets were also keeping a wary eye on escalating tensions in Libya after troops loyal to Muammar Qaddafi launched counter-offensives against rebel-held towns, increasing fears that Libya is heading for a civil war rather than the swift revolutions seen in Tunisia and Egypt.