The US dollar rose broadly against most currencies on Friday as data showed the United States continued the bleeding of job losses in March, with employers cutting 663,000 jobs in March, driving the jobless rate to 8.5 percent, the highest since 1983. The report dulled recent hopes of an emerging recovery and enhanced the greenback's safe-haven appeal. The news also dimmed a slightly growing sense of optimism that surged a day ago as leaders from the G-20 announced a $1.1 trillion deal to fight the economic crisis, prompting gains in world stock markets. The greenback tends to rise in response to bad news because investors see it as the safest store of value at a time when economies across the globe are contracting sharply. However, limited improvement in the US economy overall may eventually start to hurt the dollar.
The euro jumped against the US dollar after the European Central Bank delivered a smaller interest-rate cut than expected on Thursday and hinted vaguely that it could adopt more aggressive means to boost growth. Optimism also surged in the euro zone as leaders from the G-20 pledged to boost world output and agreed to add $500 billion to International Monetary Fund coffers. The surge in the single currency has, however, been capped a bit as ECB President Jean-Claude Trichet refused to rule out additional rate cuts in the future and created expectations for the European Central Bank (ECB) to take so-called "non-standard" measures to boost liquidity in the banking system.
Sterling soared against other major currencies on Friday, hitting a seven-week high against the US dollar, after a higher-than-expected reading in service sector data. The pound was on track for its biggest weekly gain against the greenback since early February, and was also extending a 3-day winning streak on improved risk sentiment globally and some brighter UK economic data. Also pushing the pound higher is renewed positive sentiment after G20 leaders clinched a $1.1 trillion deal on Thursday to counter the worldwide economic crisis and the United States said it would change accounting rules to allow banks more flexibility in valuing toxic assets.
The Japanese yen fell to multi-month lows on Friday as its safe-haven status was dented as investors showed more risk appetite after the Group of 20 pledged yesterday to triple the money the International Monetary Fund can lend to rescue crisis-stricken nations to $750 billion. Also boosting confidence in the market was the United States stating it would change accounting rules for handling bad assets. These developments sent Asian stocks higher but stemmed flows into perceived safe havens such as the dollar and yen and lifted higher-yielding currencies.
The Canadian dollar weakened for the first day in four ahead of a government report that showed the unemployment rate in the US rose to the highest in a quarter century. The loonie was pushed lower on the news as the US buys about three-quarters of Canada‘s exports, the largest trading relationship in the world.
The Australian dollar held firm on Friday, after surging two cents in offshore trade, buoyed by renewed risk appetite after world leaders pledged billions of dollars in a fresh effort to revive the ailing global economy. The Aussie also got a boost from the announcement of a tweak in US accounting rules, which is expected to provide banks some flexibility on treating toxic assets and a rebound in commodities, both boosting demand for riskier assets across financial markets. The New Zealand dollar surged to an 11-week high on Friday as optimistic investors were willing to take on more risk in the wake of the Group of 20's moves to revive the global economy.
