Rate fear recedes as US jobless rise

The dollar fell against world currencies yesterday after an unexpected rise in American unemployment raised hopes that a sharp increase in US borrowing costs may be avoided.

News that the jobless rate rose from 3.9% in April to 4.1% last month caused traders to dump the dollars they had been holding in the hope of further rate rises.

"With the expectation that the US may be about to experience a slowdown and the European Central Bank likely to raise rates, there is some nervousness about rate spreads between the two regions," said Jeremy Stretch, currency economist at NatWest.

The euro rose to 95 cents at one point, its highest level for six weeks, before closing in London at 94.41. Sterling also benefited from the dollar's woes, rising to a high of $1.5130 just after the data, up more than 3% from six-year lows it had hit last week at $1.4662.

The US labour department reported that the number of non-farm workers on payrolls rose by 231,000 last month, an increase entirely due to the government hiring temporary workers for this year's census. Private-sector employment actually fell by 116,000.

Mr Stretch warned that, even in the light of this week's benign US economic news, it is still too early to presume that the Fed will "take its foot off the brakes".

The euro has now risen nearly seven cents since its all time low of 88.41 reached in early May.

The increasingly loud threats of intervention from key European policymakers have helped turn market sen timent in the single currency's favour.

Yesterday the billionaire hedge fund guru, George Soros, added his voice to those advocating intervention, although he said it might not be necessary now that the euro was recovering. "I think that intervention without any other measures like raising interest rates would be effective. It would stick," Mr Soros said.

• Soros Fund Management has lost its third senior executive in less than two months after Duncan Hennes, its chief executive, handed in his resignation yesterday. His departure comes less than a year after he joined the firm and a month after the departure of Stanley Druckenmiller, the chief investment strategist, and Nick Roditi, a senior fund manager.