The dollar took back losses sustained against the euro on Monday after investors looked past Friday''s weak jobs report and viewed the numbers as a one-time disappointment unlikely to sway the Federal Reserve from scaling back its monthly bond-buying program even further in the coming months.
In U.S. trading, EUR/USD was trading at 1.3644, down 0.18%, up from a session low of 1.3638 and off a high of 1.3685.
The pair was likely to find support at 1.3549, Thursday''s low, and resistance at 1.3775, the high from Jan. 2.
The Bureau of Labor Statistics on Friday reported that the U.S. economy added 74,000 jobs in December, well below expectations for a 196,000 increase and below an upwardly revised 241,000 rise the previous month.
The report also showed that the U.S. unemployment rate fell to 6.7% in December due to a weak participation rate, down from 7.0% in November. Analysts had expected the rate to remain unchanged last month.
The numbers weakened the dollar by fueling expectations for the Federal Reserve to trim its USD75 billion monthly bond-buying program at a slower pace than once expected, though by Monday, sentiments grew that overall, the U.S. economy continues to recover and still remains in less need of monetary support.
Fed asset purchases tend to weaken the dollar by suppressing long-term interest rates, and expectations for further tapering of such ultra-loose policies tend to strengthen the greenback.
Still, the dollar faced some headwinds ahead of Tuesday''s release of U.S. retail sales, with concerns that a disappointing figure just days after a poor jobs report will increase the chances of a more gradual Fed tapering.
Meanwhile in the euro zone, Italian industrial production rose for a third consecutive in November, up 0.3% from a month earlier and in line with expectations, which helped push overall borrowing costs to their lowest levels since the creation of the euro on confidence for more sustained recovery in the euro zone''s periphery.
Italy’s auctioned EUR4 billion of three-year bonds at a yield of 1.51%, down from 1.79% at a similar sale in November.
The euro was up against the pound, with EUR/GBP gaining 0.48% to 0.8334, and down against the yen, with EUR/JPY trading down 1.00% 140.99.
The yen saw hefty safe-haven demand ahead of the release of Tuesday''s U.S. retail sales.
On Tuesday, the euro zone is to publish data on industrial production.
The U.S. is to produce data on retail sales as well as data on import prices and business inventories.
Also Tuesday, Federal Reserve Bank of Philadelphia President Charles Plosser and Dallas Fed President Richard Fisher are to speak.
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