The US dollar continued to creep higher on Friday morning in Asia as unceasing worries over troubled eurozone nations increased the safe-haven dollar demand.
Soft economic data from the U.S. overnight and the all-important U.S. non-farm payrolls data later in the day prevented traders taking risk-positions also supported the safe-haven flows into the greenback.
The European Central Bank President Mario Draghi said on Thursday that the bank cannot fix the turmoil in the currency bloc and urged Eurozone leaders to come up with a 'vision' for years ahead.
The comments came at a time when the ECB had reportedly rejected Spain's plan to recapitalize Bankia, the fourth largest bank of Spain, by injecting government bonds into the troubled bank which in turn be used as collateral for ECB funding.
The market worries over Spain's banking system increased as the total bailout cost of Spain's banking sector is estimated between EUR 50 billion and EUR 150 billion, including that of Bankia's EUR 19 billion recapitalization.
In addition, Ireland is voting in a referendum, although opinion polls show that the country will back the new German-backed EU fiscal treaty.
The U.S. saw weak reports on private sector job growth and initial jobless claims, providing further signs of sluggishness in the labor market.
ADP said private sector employment rose by 133,000 jobs in May following a downwardly revised increase of 113,000 jobs in April. Economists had expected an increase of about 154,000 jobs.
A separate report from the Labor Department showed that initial jobless claims rose to 383,000 in the week ended May 26 from the previous week's revised figure of 373,000. Jobless claims had been expected to come in unchanged at the 370,000 originally reported for the previous week.
The Commerce Department also reported slower than previously estimated first quarter GDP growth and the Chicago-area business activity expanded at a much slower rate in May.
The US dollar touched 1.2325 against the euro, its strongest mark since July 2010. With the RSI staying in the oversold territory in the daily chart of the EUR/USD pair, the market is expecting a short-term reversal.
However, the lingering debt situation in Europe and the lagging economic growth in the U.S. and China could provide further pressure on risk-associated assets, which would probably extend support the dollar to advance above the key 1.23 resistance level.
The greenback also advanced to 0.9747 against the Swiss franc for the first time in more than 15-months. The next barrier for the dollar-franc pair could be around the 0.9790/98.0 level and a move above would set its strongest mark in nearly 1-1/2 -years.
The US currency also reached as high as 1.5368 against the pound and 78.66 against the yen before leveling off on Friday morning in Asia. The greenback is presently worth 1.5380 against the pound and 78.50 versus the yen with 1.5360 and 78.90, respectively seen as the next likely resistance levels.
Looking ahead, Swiss retail sales for April, PMI data from major eurozone economies for May and the eurozone unemployment data for April are expected in the European session.
Besides the closely watched non-farm payrolls report for May, the market will also pay attention to the US construction spending for April and ISM manufacturing data for May in the North American session.
by RTT Staff Writer
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