The US dollar recouped some of its recent losses against a basket of major currencies with the exception of the euro. The Labor Department reported nonfarm payrolls increased by 192,000 in February, which was the most US employers have hired since last May. This helped push unemployment rate down to a two year low of 8.9%, further signaling a self-sustaining recovery in the US. Economists believe that the Fed will be watching the unemployment rate closely and will likely want to see payroll gains in excess of 200,000 for at least six to nine months before withdrawing monetary support from the economy and raising interest rates.
The euro continues to forge ahead of the dollar after European Central Bank policymakers reinforced expectations of a rate hike as early as next month, supporting the shock announcement made by ECB president Jean-Claude Trichet yesterday. Executive Board member Jose Manuel Gonzalez-Paramo said the ECB was ready to raise rates next month as inflation continues to rise in the Eurozone.
Sterling remains little changed against the dollar, but fell to a one-month low against the euro. The Halifax index reported UK house prices fell 0.9% month-on-month, weaker than the 0.5% decline forecasted by analysts.
The Japanese yen weakened after positive nonfarm payrolls data and unemployment rate data, but soon recouped those losses against the dollar. The yen continues to trade in a narrow range.
The Canadian, Australian and New Zealand dollars all pared losses on the US dollar after positive economic news from the US but soon after gave back those gains. The New Zealand dollar continues to remain under pressure sinking to a 12-week low as speculation that the Reserve Bank of New Zealand may cut rates as much as 50 basis points next week. The commodity currencies have remained firm against the US dollar supported by rising gold and oil prices. Oil hit a 29-month high on concern the unrest in Libya will spread to other North African and Middle East oil exporters which could curb shipments.
Indications of Overnight rates:
10-Year Treasury Note Yield: 3.525%
Dow Jones Industrial Average: 12,205.87 - 52.33
This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.