The US dollar rallied even though a report showed U.S. employers slashed 20,000 jobs in January while the unemployment rate fell to 9.7 percent from 10 percent. The market had expected a net gain of 15,000 jobs. The job report was not disastrous, as there was job growth in many areas. Data in December was revised to a net loss of 150,000 jobs from 85,000 jobs. The economy has lost 8.4 million jobs since the start of the recession in December 2007. The US dollar also benefited from economic woes in the Eurozone, which is overshadowing economic developments in the United States.
The euro fell to an eight-month low against the US dollar on worries about huge budget deficits in Greece, Portugal and Spain, which is holding back economic recovery, forcing policy makers to keep interest rates at record low for a while.
Risk aversion escalated on concerns that the cost of insuring the debt of some Eurozone nations against default reached record highs.
The Sterling also tumbled against the US dollar on the US jobs data and Eurozone sovereign debt problems. UK’s own debt problems and uncertainty ahead of an election in June continued to pressure the sterling lower. The Bank of England left rates unchanged yesterday and suspended its “quantitative easing” program.
The Japanese yen dipped against a stronger US dollar, but rose against high-yielding currencies. Risk aversion remains high as Eurozone debt fear weighs. Thus, there is a possibility for additional yen appreciation.
Canadian dollar advanced from a three months low against the dollar after the release of better-than-expected Canadian employment data. The nation gained 43,000 jobs last month, much better than the predicted 15,000. Meanwhile, unemployment fell to 8.3%. As a commodity linked currency, the stabilization of crude oil after a 5% loss yesterday also supported the gain of the Canadian dollar.
The Australian and New Zealand dollars traded steady as investors believe that the currencies have been oversold over the past few trading sessions, sparking a sharp recovery at the beginning of the day. The Australian dollar was also supported by a report that showed an expansion in the nation’s building industry in January at the fastest pace in two years. Looking ahead, investors will be focusing on next Wednesday’s Australian unemployment rate, which is expected to rise to 5.6 percent from the previous 5.5 percent.
