Dollar Rises to Five-Week High on Below-Forecast Job Losses

The dollar rose to a five-week high against the euro after a government report showed U.S. employers eliminated fewer jobs in April than economists forecast, indicating the U.S. economy may avoid falling into a recession.

The currency advanced versus the yen, the Swiss franc and the South Korean won as traders speculated the Federal Reserve may be done reducing interest rates. The dollar is headed for a second straight weekly gain against the euro after the Fed cut rates on April 30 and said “substantial” easing since September would help foster economic growth.

The dollar increased 0.5 percent to $1.5398 per euro at 9:26 a.m. in New York, from $1.5475 yesterday. It touched $1.5361, the highest level since March 24. The dollar rose 1 percent to 105.47 yen, from 104.44 yesterday. It touched 105.70 yen, the strongest since Feb. 28. The euro rose 0.5 percent to 162.35 yen, from 161.60 yen.

Futures on the Chicago Board of Trade showed an 86 percent chance that policy makers will keep the fed funds target unchanged at 2 percent when they next meet June 25, compared with 80 percent odds yesterday. The balance of bets is for a decrease of a quarter-percentage point. The Fed cut the benchmark rate from 2.25 percent this week in its seventh reduction since September.

The dollar has risen 1.5 percent against the euro this week, its biggest rally since February. It’s the first time the U.S. currency has posted two weeks of gains since December. It touched $1.6018 against the euro on April 22, the lowest level since the 15-nation currency debuted in 1999. The U.S. currency is up 1.2 percent against the yen this week.

The pound was headed for a third weekly gain against the euro, the longest rally since May 2006, after the Bank of England said yesterday in its twice-yearly financial stability report that “risk appetite will return gradually” in coming months. Sterling increased 0.4 percent to 78.04 pence per euro, from 78.37 pence yesterday, and is up 0.9 percent this week.

The European Central Bank will cut its 4 percent main refinancing rate to 3.75 percent by the end of September and 3.50 percent by year-end, according to a Bloomberg News survey of economists.

The dollar strengthened today as the Labor Department reported that U.S. payrolls shrank by 20,000 last month following a revised decline of 81,000 in March. The median forecast of 82 economists surveyed by Bloomberg News was for a drop of 75,000.

The U.S. currency increased 1 percent versus the Swiss franc and 0.7 percent versus the South Korean won. It dropped 0.8 percent against South Africa’s rand.

The currency fell 0.3 percent against the euro on April 4, when the Labor Department reported that the U.S. lost 80,000 jobs in March, the most in five years. The dollar dropped 0.8 percent versus the yen, the most in more than a week.

The dollar rose briefly against the euro on April 30 after ADP Employer Services reported that companies in the U.S. added 10,000 jobs in April, following a revised 3,000 gain in the previous month. ADP includes only private employment and does not take into account government hiring.

 

Technorati Tags: Forex, Currencies, USD, Euro, fvarga

Asian Markets Close At Multi-month Highs On Hopes Of Turnaround In U.S. Economic Conditions

The Asian markets rallied on Wall Street’s optimism, triggered by expectations that the U.S. economy will take a turn for the better.

The major averages across the Asia-Pacific region closed Friday’s session significantly higher, while the Chinese market remained closed in the session.

Crude oil futures saw further downside in Asian trading after closing Thursday’s New York session down $0.94 at $112.52 a barrel. However, gold futures were firmer in Asian trading. In the currency market, Japanese yen was weaker against most other majors.

The yen declined to a new multi-month low against the greenback in Asian trading.

Japan’s Nikkei 225 average opened significantly higher and moved sideways for the rest of the session. At the close of trading, the index was up 282.40 points or 2.05% at 14,049. Friday’s closing level represents the highest since the Nikkei hit 14,111 on January 11th, 2008.

A majority of stocks advanced, with buying interest found among stocks across sectors.

Yen’s weakness benefited export-dependent stocks, which rallied on optimism that the weaker yen would boost their export profits and increase competitiveness of their products.

Auto stocks were higher across the board in reaction to the weaker yen and solid U.S. vehicles sales reported by Japanese automakers.

While steel stocks also advanced, realty stocks saw notable gains. Japan Airlines gained over 3% in reaction to its full year results that increased after two years of profit declines.

On the economic front, the Bank of Japan reported today that Japan’s monetary base declined 2.8% in April to 88.36 billion compared to the year-ago period.

The metric has been showing weakness since early 2006 after the country gave up its easy monetary policy of flooding the short-term liquidity market to fend off deflation.

Australia’s All Ordinaries opened unchanged, but it rose sharply in early trading. Thereafter, the market witnessed sideways movement before the index closed up 107.70 points at 5,760, its best closing level since February 5th.

A report released by the Australian Bureau of Statistics showed that Australia’s retail sales a seasonally adjusted 0.5% in March compared to the previous month. Economists had expected a 0.3% increase for the month.

The Australian market saw broad based buying interest. Energy, financial and material stocks engineered the rally.

Hong Kong’s Hang Seng Index opened up with a gap of about 570 points and moved sideways for the rest of the session. The index closed up 485.67 points or 1.89% at 26,241, with the average ending at a 3-1/2 month high.

Property, finance and China-related stocks moved to the upside.

However, utility and resource stocks came under selling pressure.

South Korea’s Kospi rose higher and showed sideways movement before closing up 22.80 points or 1.25% at a 4-month high of 1,848. The Korean won weakened in the session, helping exporters.

Among the other markets in the region, the Indonesian Jakarta Composite Index and the New Zealand NZ 50 Index ended up 1.35% and 0.85%, respectively.

While the Singaporean Straits Times Index gained 2.62%, the Taiwanese Weighted Average advanced 0.49%.

Technorati Tags: Stock Market, Asia, fvarga

Hong Kong Dollar Hits 11-day Low Against US Dollar [USD/HKD] After HKMA Cuts Rate

The Hong Kong dollar traded lower against its US counterpart in early deals on Friday. At about 4:35 am ET, the Hong Kong currency hit an 11-day low of 7.7975 against the US dollar, compared to yesterday’s closing value of 7.7950.

Thereafter, the local dollar has weakened slightly and is presently trading near 7.7957.

The Hong Kong Monetary Authority cut its base rate by a quarter-percentage point on Friday, to a level of 3.50 percent. This matches the interest rate cut announced Wednesday by the FOMC by 25 basis points to 2%.

A report from the NTC economics Ltd revealed that Hong Kong’s Purchasing Managers Index fell in April to a level of 50.1 from a reading of 50.8 in March, showing that the rate of growth of expansion of Hong Kong economy had slowed.

Technorati Tags: Forex, Currencies, HKD, fvarga

Dollar Mixed Versus Majors Ahead Of April Jobs Report [EUR/USD]

The dollar was mixed against other major currencies Friday morning in New York as traders braced for the pivotal April employment report, which may paint a picture of a jobs market in distress.

At 8:30 am ET, the Employment Situation Report for the month of April will offer a comprehensive examination of the labor market, which has experienced three consecutive months of job loss.

Analysts are expecting the streak to extend to 4 months, predicting a loss of 75,000 jobs in the month of April compared to a loss of 80,000 in May.

At 10:00 am ET data on factory orders for March will be released. Analysts are predicting a growth of 0.2 percent in orders, a swing from February’s decline of 1.3 percent.

The dollar was little changed against the euro Friday morning, pausing from its recent uptrend. The buck was range-bound near 1.5570 in early dealing, down very slight from yesterday’s 5-week high of 1.5430. The dollar has been in rally mode for over a week, moving away from a record low near 1.60.

French producer prices monthly inflation rose slightly in March. Producer prices rose 0.5% on-month, in line with expectations. In February, producer prices had climbed 0.4%. Year-on-year, producer prices were up 5.2% in March, slightly more than the 5.1% rise expected.

German retail sales in real terms dropped 0.1% month-on-month in March, while expectation was 0.6% rise, a preliminary report from the Federal Statistical Office showed Friday. On an annual basis, retail sales were down 6.3%, much faster than the estimate fall of 2.3%. In nominal terms, retail sales slipped 3.7% year-over-year.

The dollar rose to its highest since late February versus the yen Friday morning, but pared its early gains approaching mid-morning. The dollar climbed to 105.02 before easing back to 104.60 by 7 am ET.

The greenback extended its run of choppy trading versus the sterling, dropping to 1.9896 from an early high of 1.9722. The pair has been bouncing back and forth in a wide range between 1.96 and 2 bucks for the past two weeks.

UK house prices tumbled in April. A report from the mortgage lender Halifax showed that house prices declined 1.3% month-on-month in April. This comes after a 2.5% fall in March.

UK’s CIPS/NTC Construction Purchasing Managers’ Index, or PMI, stood below the no-change mark of 50.0 for second straight month in April. Headline Construction PMI fell more-than-expected to 46.1 in April from 47.2 in March. Economists were looking for a reading of 47. The April number is the lowest reading in almost nine-and-a-half years.

The buck hit a 2-week high of .9274 versus the aussie overnight, but reversed course Friday morning to trade at .9330 as of 7 am ET. Retail sales in Australia grew by more than expected in March, raising concerns that more interest rate hikes could be in store for the nation’s hot economy.

The Australian Bureau of Statistics reported Friday that retail trade rose a seasonally adjusted 0.5 percent in March, to a seasonally adjusted total of A$20.17 billion. Most economists had predicted a much more modest increase of 0.1 percent.

Technorati Tags: Economy, Forex, Asia, Europe, USA, fvarga

Euro Shows Signs of End to Bull Run

Speculation that the euro’s seven-year bull run was coming to an end intensified on Thursday as the single currency fell to five-week lows against the dollar and the pound.

Many economists are reaching the view that eurozone growth has slowed to the point where the European Central Bank will have to cut interest rates or risk stunting economic growth.

“Within the space of one week, the outlook for the eurozone has worsened significantly,” said Carsten Brzeski at ING Capital Markets. “Sound economic fundamentals are melting away.”

Recent eurozone data have been disappointing, with German business sentiment, measured by the Ifo institute, in April recording its biggest monthly fall since September 2001, while eurozone purchasing managers’ indexes have also fallen.

The European Central Bank has so far maintained a hawkish stance on interest rates.

As the Federal Reserve has slashed its main interest rate by 3.25 percentage points to 2 per cent since the start of the market turmoil last summer, and the Bank of England cut its main lending rate by 0.75 per cent to 5 per cent, the ECB has kept its official interest rate on hold at 4 per cent.

The diverging interest rate paths between the three central banks have given investors a reason to keep buying the euro, pushing it nearly 70 per cent higher against the dollar since 2001 and up almost 30 per cent against the pound.

Last month the euro reached an all-time high of $1.6018 against the dollar and a record high of £0.8097 against the pound. But it has since fallen 3.6 per cent, on Wednesday hitting $1.5438 against the dollar and £0.7802 against the pound, its weakest level since March 25.

 

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