NEW YORK, March 7 (Reuters) - The dollar rebounded from record lows on Friday as a Federal Reserve liquidity injection fueled some speculation the central bank might hold off on cutting interest rates aggressively even after a sharp contraction in U.S. payrolls.
Profit-taking and short-covering also helped support the dollar, traders said, after three days of successive sharp gains in the euro, which brought the European currency to historic peaks.
The Fed announced a series of term repurchase operations totaling $100 billion to ease liquidity pressures in stressed financial markets, overshadowing a Labor Department report showing U.S. employers cut payrolls for a second month in February.
"The liquidity injections are key here," Firas Askari, head currency trader at BMO Capital Markets in Toronto, said of the dollar's climb. "Some people are thinking that the Fed may not be as aggressive (in cutting rates) and that they are going to inject liquidity in other ways."
Interest rate futures reflected reduced views of the chances of a 75-basis-points cut in the Fed's benchmark overnight lending rate at the March 18 meeting, to about 96 percent from about 130 percent earlier.
The fed funds rate target is currently at 3.0 percent after being lowered by 2.25 percentage points since mid-September.
After the February payrolls report the euro initially surged to as high as $1.5459Courtesy :http://www.reuters.com/article/usDollarRpt/idUSN0763095320080307
