A better-than-expected US payroll report triggered risk buying, with the South African rand coming sharply off its intraday worst levels in the afternoon session on Friday.

At 3.40pm the rand was bid at 8.0335 to the dollar from a previous close of 8.0600. It was bid at 11.4745 to the euro from a previous 11.5505 and at 13.4698 against sterling from 13.4937.

The euro was bid at US$1.4294 from US$1.4353 overnight.

The US unemployment rate fell unexpectedly to 9.4 percent in July as job losses in the month narrowed to 247 000, the Labour Department reported.

The non-farm payrolls report, seen as a key indicator of economic momentum, was better than that expected by private economists, who had forecast a loss of 325,000 jobs and a jobless rate rising to 9.6 percent from the June level of 9.5 percent.

The number of unemployed fell slightly to 14.462 million from 14.729 million in June.

The agency revised down the number of job losses for May to 303,000 from 322 000 and for June to 443 000 from 467 000.

Since the recession began in December 2007, payroll employment has fallen by 6.7 million, according to the agency.

A local trader said: "US payroll figures came in better than expected, leading to more risk. People are buying rands, and holding onto their dollars," the trader said.

JP Morgan's Niall O'Connor said in a note: "$/ZAR continues to push higher with the break of the 8.00 area suggesting additional short-term upside. Note that that we continue to view this as a short-term corrective phase and will be awaiting a better setup to establish shorts."

Dow Jones Newswires reports the safe-haven yen fell to a one-month low against the dollar and a two-month low against the euro after the release of a stronger-than-expected US jobs report on Friday morning.

Other higher-yielding currencies also initially benefited against the safe haven dollar, reinvigorating the rally in risk appetite that slowed midweek.

As a safe-haven asset, the dollar usually declines against riskier, higher-yielding currencies, such as the euro, when positive data boost market sentiment, even if it's positive US data.

But now, this trading strategy is being turned on its head. It appears that good US news is starting to be good for the US unit again, something markets haven't seen since the financial crisis began.

A knee-jerk push higher in the euro against the buck reversed within minutes of the data's release, and the common currency fell to an intraday low of $1.4299 from an intraday high of $1.4415. The same happened for the UK pound.

"In the foreign exchange market, the idea of selling the dollar on strong US data, because it is risk positive, is being appropriately challenged," said Alan Ruskin, head of international strategy at RBS in Greenwich, Conn.

"The appropriate trade is to avoid euro versus dollar and focus on key risk crosses like short-yen versus the dollar," he said, adding that emerging market currencies, such as the Brazilian real, are also preferred.

"It's probably the best jobs report we've had in about a year," said Sophia Drossos, a currency strategist at Morgan Stanley in New York. "It reinforces other signs of improvement in the US economy and the global economy. I think that should reinforce risk appetite in the foreign exchange markets."

She also stressed that investors will likely take this opportunity to buy more cyclical currencies, like those that are tied to commodity demand.

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