* Dollar soars vs yen, euro on surprise jobs data
* U.S. job loses in Nov of 11,000 vs forecast of 130,000
* Classic "Buy North America" day in currency market
* Talk of renewed yen carry-trade emerging
* China says dollar still at heart of its FX reserves
(Updates prices, adds quotes)
By Steven C. Johnson
NEW YORK, Dec 4 (Reuters) - The dollar soared against the
yen and euro on Friday after data showed the United States shed
far fewer-than-expected jobs last month, boosting hopes that
recovery is picking up steam.
Employers cut 11,000 non-farm jobs last month while markets
had expected job losses of 130,000. The surprisingly strong
report fed speculation that the Federal Reserve may soon have
to consider raising interest rates from record lows, which
would increase returns on dollar assets. For details, see
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The dollar broke above 90 yen for the first time in three
weeks and was on track for its best day against the Japanese
currency since August, while the euro fell below $1.49 and
headed for its biggest one-day decline since July.
The dollar has lost 7 percent this year against six major
currencies <.DXY> as markets have bet the United States would
lag recovery in the rest of the world and that the Fed would
keep rates low indefinitely.
"A jobs recovery is the last piece of the puzzle before we
can say we're in full recovery, so it raises the question that
maybe rates will go up sooner rather than later. That's pushed
the dollar higher," said Fabian Eliasson, vice president of FX
sales at Mizuho Corporate Bank in New York.
The dollar rose above 90 yen for the first time since Nov.
13 and was last up 1.9 percent at 89.85 yen <JPY=> while the
euro fell 1.2 percent to $1.4882 <EUR=>, well off a $1.5091
peak.
The dollar rose 1.4 percent to 1.0138 Swiss francs <CHF=>
after earlier falling below parity while sterling fell 0.3
percent to $1.6515 <GBP=>.
Recent Fed statements about keeping U.S. rates low for an
extended period have encouraged investors to use the dollar as
a funding vehicle with which to purchase higher-yield assets.
But analysts said the data today forced many traders to
cover short dollar positions and may signal the end of trades
that blindly sell the dollar on strong economic news.
"If (signs of a job recovery) continue, you may start to
see the dollar rally on strong data rather than the opposite,"
Mizuho's Eliasson said.
YEN DOWN, NORTH AMERICA UP
In fact, some analysts said the yen may be replacing the
dollar as the favored funding, or "carry trade," currency.
Last week, the dollar hit a 14-year low at 84.82 yen but
the Japanese currency has fallen steadily since the the Bank of
Japan on Tuesday announced extra liquidity-boosting steps to
fight deflation.
"The market has brought forward anticipated fed rate hikes,
but Japan offers a stark contrast," said Brown Brothers
Harriman strategist Marc Chandler, pointing to the BoJ's move
this week to offer banks 10 trillion yen in short-term funds.
Alan Ruskin, chief international strategist at RBS
Securities in Greenwich, Connecticut, said the uniformly strong
U.S. data Friday amounts to a classic "buy North America" day
on currency markets.
The Mexican peso was a big gainer, with the greenback
slipping to a 13-month low beneath 12.50 pesos <MXN=>.
The Canadian dollar also rose after Canada jobs figures for
November showed that 79,000 jobs were created last month, more
than five times the 15,000 forecast in a Reuters poll. <CAD=>.
Canada and Mexico depend heavily on U.S. trade links.
Some analysts said year-end and quarter-end rebalancing was
also helping the dollar on the margins and might continue to
provide a bid for the U.S. currency throughout December.
"I would also say that one piece of data does not a trend
make," added Mike Moran, senior currency strategist at Standard
Chartered in New York. But he said more strong U.S. data could
shift trading habits and "shift the market toward more
fundamental, interest-rate-driven trading sentiment."
China said Friday it would look to diversify its huge
foreign exchange reserves across currencies and high quality
assets, but the dollar would remain the anchor currency. There
was little reaction on currency markets.
(Additional reporting by Jamie McGeever in London; Editing by
Kenneth Barry)
((steven.c.johnson@reuters.com; +1 646 223 6346; Reuters
Messaging: steven.c.johnson.reuters.com@reuters.net))
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