Dollar Falls on US Employment Figures
The US dollar experienced its largest weekly loss since November after US jobs data showed that US employers shed 85,000 jobs in December. The figures dimmed speculation among investors that the Federal Reserve will cut rates anytime soon. In addition to the dismal jobs data a report due this week is expected to show that retail sales slowed. Hidetoshi Yanagihara of Mizuho Corporate Bank Ltd. in New York stated, “Investors were disappointed and sold dollars. The market was expecting too much.” The US unemployment rate is holding at 10%. Most traders and investors had expected the figures to continue the trend set by November’s jobs figures which showed job losses of 11,000 prompting speculation that the Fed would raise rates early in 2010. Brian Kim of UBS AG stated, “The headline doesn’t sit well with the dollar. People had been bracing for a flat to positive number. It puts expectations for a Fed rate hike on ice.”
Dollar Decline May be Short Lived
Last December 4th the dollar index posted its largest daily gain since January 2009 when the US Labor Department reported an unexpected decline in unemployment. On Friday ICE Futures U.S. dollar index fell 0.7% to 77.454. Some analysts say that the recent employment figures do not mitigate the fact that the US economy has shown some growth and believe that dollar losses will be short lived. Vassili Serebriakov of Wells Fargo said, “All together this report will probably work against the more optimistic expectations on the U.S. economy. It is negative for the dollar, and we are seeing it getting weaker. But we don’t expect to see a complete reversal in the dollar gains from last month based solely on this report. We need more data points.”
Pound Falls, Political Haggling Blamed
The pound declined 0.8% against the dollar after conservative opposition leader David Cameron said that the Labor Party’s economic policies are a threat to the UK’s credit ratings. On January 7th the Bank of England said it would spend the rest of its 200 billion-pound ($318 billion USD) asset purchase program funds and keep rates at record lows. Paul Robinson of Barclays Plc wrote, “This increased optimism about U.K. prospects clashes with the prevailing mood of most of the investors we meet. There remains the risk of an increase of asset purchases.”
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