CURRENCY : Employment Data Puts Dollar in a Nose Dive

Money traders dumped dollars in a hectic selloff and sharply depressed the currency Friday after a surprising Labor Department unemployment report that showed the U.S. economy may be slowing down.

Gold prices eased. Republic National Bank in New York quoted bullion at $429 an ounce as of 4 p.m. EDT, down from $429.75 late Thursday.

Currency brokers said the foreign exchange market was stunned by the Labor Department’s report, which showed an unexpectedly big rise in unemployment figures last month, from 5.4% of the work force to 5.6%.

Contrary to earlier evidence about the economy, the Labor Department report implied that growth is easing, thereby relieving inflation pressure and lessening the prospect of higher interest rates.

Many currency traders have been assuming that as a consequence of a growing economy, U.S. interest rates must rise, which would make dollars more valuable.

Appreciation Could Erode

“The unemployment number wasn’t taken very well at all, to say the least,” said John W. Baker, chief currency dealer at the New York office of Bank Julius Baer & Co., a Swiss banking concern. “People got a little panicked about holding dollars.”

Currency strategists said that if the next series of U.S. economic reports provides more evidence of a slowdown, then the dollar’s appreciation over the last four months could erode dramatically.

In Tokyo, where trading ended before the release of the U.S. unemployment figures, the dollar rose 0.05 yen to a closing 136.75 yen. Later in London, it was quoted at 137.65 yen. By the time trading concluded in New York, the dollar had fallen to 135.97 yen, down from 136.27 yen late Thursday.

The British pound fetched $1.6755, slightly higher than its $1.6730 exchange rate Thursday. In New York, the pound strengthened further to $1.6850, up from $1.6693 late Thursday.

Silver Declines

Other late dollar rates in New York, compared to levels late Thursday, included: 1.8524 West German marks, down from 1.8730; 1.5567 Swiss francs, down from 1.5787; 1.2355 Canadian dollars, down from 1.2363; 6.2915 French francs, down from 6.3670; 1,381.50 Italian lire, down from 1,393.75.

Late dollar rates in Europe, compared to Thursday: 1.8665 marks, down from 1.8795; 1.5725 Swiss francs, down from 1.5835; 6.3365 French francs, down from 6.3780; 2.1050 Dutch guilders, down from 2.1205; 1,388.50 Italian lire, down from 1,398.50; 1.2362 Canadian dollars, down from 1.2370.

On the Commodity Exchange in New York, gold for current delivery fell 90 cents an ounce to $429.30. Earlier in London, gold closed at $427.50, down from $430.70 Thursday; in Zurich, Switzerland, it fell $2.50 to $428; and in Hong Kong it fell $1.26 to $431.35.

Silver was quoted at $6.52 an ounce in London, down from $6.58 Thursday. On the New York Comex, silver for current delivery fell 5.6 cents to $6.518.

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