The dollar took yet another brutal drubbing at the hands of other major currencies on Friday as traders expressed renewed risk appetite and relief that the government's stress test on the biggest banks produces no major surprises.
With stocks hanging onto their gains after early rallies were sold into earlier in the week, higher-yielding currencies continued to be favored by traders.
The cause of the bulls was helped by a government report showing that employment fell by 539,000 jobs in April. While the decrease reflects continued weakness in the labor market, it was much smaller than the decrease of 600,000 jobs that was expected by economists.
While, the report also showed that the unemployment rate rose to 8.9 percent in April from 8.5 percent in March, the decrease in employment marked the smallest drop in jobs since October of 2008.
The dollar plummeted versus the euro, dropping more than 2 cents to a 6-week low of 1.3627. With the loss, the dollar extended a 2-week downtrend coinciding with gains in equities.
The buck also came under heavy pressure again versus the resurgent sterling, plunging to a fresh 4-month low of 1.5215. With the loss, the dollar moved further away from January's 23-year high of 1.3501.
Its been a brutal week for the dollar against resource-linked currencies, which have been lifted dramatically by rising commodity prices. The dollar dropped to a new 6-month low of 1.1498 versus the loonie. A move below 1.1459 would bring the buck to its lowest level since last October.
Meanwhile, the buck slipped to .7677 versus the aussie, setting a new 7-month low.
Government regulators released the results of their financial stress tests late Thursday afternoon, saying that about half of the nation's biggest financial firms need to improve their capital positions in order to ensure that they can survive further economic weakness.
The results of the stress tests showed that 10 of the 19 banks tested need to raise a total of $74.6 billion. The banks involved in the exercise account for two-thirds of the assets and more than half of the loans in the U.S. banking system.
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