* Risk aversion rises after weak U.S. jobs data
* U.S. Oct payrolls fall 190,000, jobless rate at 10.2 pct
* Traders reduce bets of Fed raising interest rates
* Investors also keep an eye on G20 meeting
(Adds details, updates prices)
By Wanfeng Zhou
NEW YORK, Nov 6 (Reuters) - The yen rose on Friday after a
report showed the U.S. unemployment rate spiked to 10.2
percent, fueling worries about the health of the economy and
boosting safe-haven demand for the Japanese currency.
The government reported U.S. employers cut a
deeper-than-expected 190,000 jobs in October, driving the
unemployment rate to a 26-1/2-year high. For details, see
[].
The news dashed hopes the recession was ending after recent
gross domestic product and jobless claims readings had seemed
to point to a recovery. With the labor market still weak, U.S.
consumer sentiment and spending will likely remain under
pressure, analysts said.
"The yen has obviously benefited ... from risk aversion,"
said Samarjit Shankar, managing director of global FX strategy
at BNY Mellon in Boston.
"The big psychological impact was from the 10.2 percent
unemployment rate. It's going to cast further doubt on whether
the incipient U.S. economic recovery can be sustained without
further government support," he added.
The dollar fell as low as 89.62 yen, according to Reuters
data, and last traded 1 percent lower at 89.85 yen <JPY=>. The
euro declined 1.2 percent to 133.45 yen <EURJPY=R>, after
hitting a session low of 133.22 yen.
Analysts said the dollar also came under pressure against
the yen as two-year U.S. Treasury yields eased after the jobs
data. The two-year notes are most sensitive to potential
changes in the Federal Reserve's monetary policy.
The prospects of prolonged, low U.S. interest rates have
fueled speculation the greenback is replacing the yen as a
primary funding currency in carry trades. In such trades,
investors borrow in low-yielding currencies and reinvest the
proceeds in currencies and assets with greater returns.
"Dollar/yen has essentially become an interest rate play,"
said Paresh Upadhyaya, portfolio manager at Putnam Investments
in Boston. "With interest-rate differentials narrowing further
against the dollar, you're seeing dollar/yen under pressure."
WORST OF BOTH WORLDS
The dollar initially rose after the jobs data on safe-haven
demand, but pared gains on reduced expectations the Fed -- the
U.S. central bank -- would tighten its ultra-loose monetary
policy soon.
Traders reduced their bets the Fed will begin raising rates
from the current near-zero level in the middle of next year.
The implied chances of the Fed's first rate hike by mid-2010
slipped to about 66 percent from 84 percent late on Thursday.
[]
The ICE Futures U.S. dollar index, a measure of the
greenback's value against a basket of six other major
currencies, was little changed at 75.774 <.DXY>.
The euro slipped 0.2 percent at $1.4847 <EUR=>, near a
session low at $1.4815, according to Reuters data. The euro
briefly erased all losses versus the dollar to hit a session
high of $1.4913.
A rebound in the U.S. stock market also helped risk
sentiment to recover. Some investors also pointed to the fact
that job losses continued to slow while declines for earlier
months were revised lower.
Daniel Katzive, currency strategist at Credit Suisse in New
York, said the jobs numbers were not weak enough to call into
question a global recovery story, but were weak enough to keep
the markets thinking the Fed will be on hold for some time.
"The Fed is going to stay accommodative for a long time.
While we may have a few more periods of equity market stress,
we're not at the beginning of a prolonged period of serious
risk aversion," he said. "It's the worst of both worlds for the
dollar."
A rebound in stocks and a widening yield differential
against the U.S. currency also helped lift the perceived
riskier, higher-yielding currencies. The Australian dollar rose
0.5 percent to US$0.9166 <AUD=>.
A meeting of finance ministers and central bankers the
Group of 20 major industrialized and emerging nations in
Scotland on Friday and Saturday is also in focus, although
discussions on currencies are not on the formal agenda.
(Editing by James Dalgleish)
