July 6 (Bloomberg) -- The dollar strengthened to a two-year high against the euro and rose versus most other major counterparts as demand for safety increased after U.S. employers added fewer jobs in June than forecast.
The yen gained versus the greenback as the last U.S. employment report before the Federal Reserve’s next meeting showed the jobless rate stayed unchanged at 8.2 percent. The euro fell as a slide in Spanish industrial production added to concern Europe’s debt crisis will worsen.
“This number will continue to erode the fragile risk sentiment that we’ve been seeing lately,” Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York, said of the employment report. “The question will be will this be enough to prompt the Fed to reintroduce another QE,” or large-scale asset purchases.
The dollar appreciated 0.9 percent to $1.2280 per euro at 12:12 p.m. New York time, extending its weekly gain to 3.2 percent. It touched $1.2266, the strongest level since July 2010. The yen gained 0.4 percent to 79.63 per dollar and climbed 1.3 percent to 97.79 per euro.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the six currencies, advanced as much as 0.7 percent to 83.396. It was the highest since June 1, exceeding the 82.950 it touched yesterday after European Central Bank President Mario Draghi said the euro bloc still faces risks after policy makers cut their benchmark interest rate to a record 0.75 percent. The index has rallied 2.1 percent this week, the most since November.
Commodity-linked currencies dropped, led by the South African rand, which slid versus all of its 16 most-traded peers. Stocks and commodities fell, with the Standard & Poor’s 500 Index losing 1.3 percent and the S&P GSCI Index of 24 raw materials dropping 2.3 percent.
Payrolls increased by 80,000 jobs last month after a revised gain of 77,000 in May, Labor Department data showed today in Washington. Economists projected an increase of 100,000, according to the median estimate in a Bloomberg News survey. Private employment, which excludes government agencies, grew 84,000 in June, the weakest in 10 months.
“There are two forces going on with this number,” John Shin, senior Group-of-10 foreign-exchange strategist at Bank of America Corp. in New York, said in a telephone interview. “One is the natural risk-off, dollar-positive sentiment. Counteracting that is that a weak number further implies more quantitative easing in the fall, which is dollar-negative.”