NEW YORK, Nov 07, 2009 (Xinhua via COMTEX News Network) --

The U.S. dollar on Friday regained some losses incurred during the past week as the U.S. unemployment rate rose to an unexpected 10.2 percent in October for the first time in 26 years.

As risk sentiment remains the main driving force in currency trading, the dollar tends to fall against the euro and other higher-yielding currencies on positive economic news, and to rise when investors worry about the economic outlook.

On Friday, stocks were choppy. The price of the dollar against the euro was tightly tracking securities, which posted a modest advance in light trading.

In New York trading, the U.S. dollar rose to 1.0768 Canadian dollars from 1.0648 late Thursday, and inched up to 1.0179 Swiss francs from 1.0165 francs. It was nearly flat at 89.93 Japanese yen.

The unemployment rate rose from 9.8 to 10.2 percent in October, the U.S. Bureau of Labor Statistics reported on Friday. Most analysts had forecast a smaller increase to 9.9 percent.

The rise in unemployment indicated the weak labor market would remain a major hurdle for U.S. economic recovery, analysts said.

Nonfarm payroll employment continued to decline by 190,000 in October, the smallest drop since August 2008. The largest job losses over the month were in construction, manufacturing, and retail trade.

There were positive signs that temporary employment posted the first significant increase in this cycle. Combined August and September job losses were 91,000 less than previously estimated.

Since the start of the recession in December 2007, the number of the unemployed has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points.

Rising unemployment also signaled that the U.S. Federal Reserve would keep interest rates at their current near-zero range into late next year.

The Fed decided on Wednesday to maintain the target range for the federal funds rate at 0 to 0.25 percent, in line with expectations.

The central bank said that current economic conditions are likely to warrant low levels of the federal funds rate for an "extended period."

Although economic activity might remain weak for a time, the Fed anticipates that policy actions to stabilize financial markets, fiscal and monetary stimulus and market forces would support a strengthening of economic growth.

The dollar has been traded lower earlier this week amid strong economic reports. The Institute of Supply Management (ISM) said on Monday that its manufacturing index rose from 52.6 in September to 55.7 in October, the highest level since April 2006.

The U.S. Pending Home Sales Index rose 6.1 percent in September, the National Association of Realtors (NAR) reported. The index, a forward-looking indicator based on signed contracts, has been rising for eight consecutive months. It was 21.2 percent higher than a year ago.

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