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Euro surges close to 1.57 dollars after US jobs report

LONDON - The European single currency jumped close to 1.57 dollars on Friday as traders digested news that the US unemployment rate soared to 5.5 percent in May.

In afternoon European trading, the euro raced as high as 1.5699 dollars. It later stood at 1.5678, up from 1.5590 in New York late on Thursday.

The US unemployment rate jumped unexpectedly by a half percentage point to 5.5 percent last month, the steepest increase in more than two decades, data from the US government's Labor Department showed on Friday.

The US economy shed 49,000 jobs in May, almost twice the number the prior month, to mark the fifth monthly drop in a row.

The unemployment rate was the highest in nearly four years as jobs continued to be lost in construction, manufacturing, retail trade and temporary help services, the Labor Department said. Healthcare continued to add jobs.

"The (US) economy has little forward momentum, employment is shrinking and the unemployment rate could reach 6.0 percent by the end of the year," said Capital Economics analyst Paul Ashworth.

"However, our worst fears appear to have been avoided. Rather than getting worse, conditions have stabilised and may even be improving slightly.

"Accordingly, we think there is no longer any realistic prospect of further interest rate cuts this year."

The euro began surging higher on Thursday after European Central Bank president Jean-Claude Trichet suggested that interest rates could increase in the eurozone as early as July to tackle inflation.

US Federal Reserve chairman Ben Bernanke, meanwhile, signalled earlier this week that US rates had probably bottomed, sparking speculation that the next move in borrowing costs in the world's largest economy will be a hike.

The ECB kept its key rate on hold at 4.0 percent Thursday, while the Fed has slashed its rates to 2.00 percent, from 5.25 percent in September, to bolster the flagging American economy.