Oil falls as stronger dollar offsets encouraging jobs data

Oil prices fell on Friday as the U.S. dollar rose against the euro, weakening the purchasing power of buyers using other currencies.

Light, sweet crude for September delivery dropped 1.01 dollars, or 1.4 percent, to settle at 70.93 dollars a barrel on the New York Mercantile Exchange.

The contract initially rose after the release of the encouraging jobs data which showed the U.S. jobless rate unexpectedly dropped to 9.4 percent from 9.5 percent in July, adding to optimism that the economy was turning around.

However, oil prices began to drop as the dollar got stronger against the euro. The Dollar Index rose more than 1.2 percent, undermining demand for dollar-priced assets such as oil used to hedge against inflation.

In London, Brent crude for September delivery dropped 1.41 dollars to 73.42 dollars a barrel on the ICE Futures exchange.

Gold falls as dollar soars after U.S. jobless rate drops

Gold futures on the COMEX Division of the New York Mercantile Exchange declined slightly for the third session on Friday as unexpected jobless data boosted dollar to rise sharply, much reducing gold's appeal of safe-haven. Silver and platinum both ended a little higher.

Gold price for December delivery fell 3.40 U.S. dollars, or 0.4percent, to finish at 959.50 dollars an ounce.

The Labor Department said that non-farm payroll employment fell by 247,000 in July following a revised decline of 443,000 in June. The unemployment rate for July unexpectedly declined to 9.4 percent from 9.5 percent in June. Analysts had expected joblessness to grow to 9.6 percent and this is the first decline in 15 months.

Analysts indicated the bullish jobless data provided a strong signal of the beginning of a faster-than-expected economic recovery.

Buoyed by the jobs report, dollar jumped sharply with the rate against euro climbing more than 2 cents to 1.4193 dollars from the intraday low of 1.4413 by the end of gold floor trading time. The dollar index, a gauge measuring the greenback's value against other six main currencies, rose 0.931 point, or 1.2 percent, to 78.876.

Encouraging prospects of the U.S. economy and a stronger dollar both put some pressure on gold as the precious metal's appeal of hedge and safe-haven were reduced.

September silver finished at 14.668 dollars per ounce, up 2.3 cents. October platinum fell 5.10 dollars to 1268.50 dollars an ounce. 　

Rupee up on IMF loan hopes

The rupee firmed against the dollar and stocks ended higher on Friday on expectations the International Monetary Fund will approve the country's third loan trance and reports a top militant was killed, dealers said. The rupee closed at 82.27/37 to the dollar, strengthening from Thursday's close of 82.50/60. Pakistan obtained a $7.6 billion emergency loan package from the IMF last November to avert a balance of payments crisis. The third tranche of about $850 million is expected to be approved when its board meets on Friday. "The IMF is expected to approve the third trance and the additional loan which is why we've seen the rupee strengthen this week," said a local currency dealer. Pakistan has also said it would request an extra $4 billion as "insurance" to help it cope with its economic crisis. The rupee has lost 3.85 percent this year after losing 22.12 percent in 2008. Pakistani stocks rose 0.64 percent, or 49.91 points, to end at 7,872.23 on turnover of 112.5 million shares.

US dollar hits weekly high against euro

The US dollar rose to a seven-day high against the euro and also gained against the Japanese currency in a surprise rally on better-than-expected US jobs data.

At 1000 (AEST) on Friday, the euro fetched $US1.4173 from $US1.4347 the late trading time in New York on Thursday.

The dollar also rose to 97.51 yen from 95.44 on Thursday.

The surge in the dollar came after government data showed the US unemployment rate fell to 9.4 per cent in July and job losses in the month narrowed to 247,000. The surge surprised some analysts.

The US currency has mostly been regarded as a safe haven unit sought by investors seeking cover against risk. But Friday's market action showed a shift in tone.

'The US dollar rallied in response to surprisingly strong nonfarm payroll results, which was surprising in that the currency has generally only traded as a 'safe haven' asset,' said Terri Belkas, currency strategist with Forex Capital Markets.

She said the US Federal Reserve's interest rate decision and US retail sales numbers the coming week 'will be important as a gauge of what will drive the US dollar going forward: economic data or risk appetite'.

Kathy Lien, director of currency research at Global Forex Trading, said the dollar rally on Friday 'looks like fundamentals may be finally impacting the dollar in a positive way meaning that good data is good for the dollar'.

With the greenback surging on Friday in line with US stocks that shot up to their best levels of the year after the much-awaited July jobs report, 'the negative correlation between them appears to have been drawn into question -- at least temporarily,' said Michael Woolfolk of the Bank of New York Mellon.

'Keep in mind that the standard model and historical precedent argues in favour of a positive, not negative, correlation between equities and the local currency,' he said.

'At some point in the recovery process this will happen.'

Woolfolk predicted that if the US economy began to lead the global economy out of recession, the dollar could benefit as it did in the wake of 1997-98 Asian crisis triggered by a regional currency meltdown.

'Consequently, the US dollar could benefit during the second half of 2009 from two scenarios: a faster than expected US recovery and a return to crisis conditions.

'Anything in between is likely to prove neutral to negative for the US dollar as sovereigns continue to diversify reserves.'

In late New York trade the dollar also jumped to 1.0816 Swiss francs from 1.0652 on Thursday.

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