Monday in Asia, the dollar extended its Friday's slide against other major currencies as a better-than-expected U.S. jobs report bolstered hopes the global recession may be easing and dented demand for the safe-haven greenback.
According to a report from the Labor Department, employment fell by 539,000 jobs in April following a revised decrease of 699,000 jobs in March. The decrease in employment marked the smallest drop in jobs since October of 2008.
While the decrease was smaller than the loss of 600,000 jobs expected by economists, upward revisions to the number of job losses in February and March partly offset some of the optimism about the labor market.
The Labor Department also said that the unemployment rate rose to 8.9 percent in April from 8.5 percent in March. With the increase, which came in line with economist estimates, the unemployment rate rose to a new 25-year high.
Growing optimism that the world has already endured the worst of the recession have boosted stock markets and risk appetite in recent weeks, increasing pressure on the dollar.
The market is positioning for recovery over the next few weeks, which means the dollar will clearly see considerable weakness as this plays out.
The rally in U.S. banking shares after the release of results of stress tests in the sector is also supporting expectations that conditions in the beleaguered U.S. financial system are improving.
A jump in oil prices also weakened the dollar. In Asian deals today, oil steadied at nearly a 6-month high of above $58 a barrel, on hopes that energy demand would rebound alongside a global economy recovery.
Oil, which has plummeted from a record of over $147 a barrel in July, has risen over the past three months on hopes that the economic recession may be easing.
A strong rally in equities markets has also helped oil prices gain over 14 percent so far this month and 10 percent last week.
In Asian deals on Monday, the dollar plunged to a 7-week low of 1.3669 against the euro. If the dollar weakens further, it may likely target the 1.374 level. At last week's close, the euro-dollar pair was quoted at 1.3640.
After hitting a 5-week high of 1.2888 on April 22, the dollar slipped against the euro as Germany's economic sentiment turned positive in April for the first time since July 2007, signaling that measures to shore up the biggest Euro zone economy from the worst recession since the World War II are taking effect.
Adding to euro's uptrend, reports showed last week that Germany's industrial output was better than expected in March, raising hopes of a recovery in the economy. Further, German trade surplus unexpectedly increased in March as exports grew for the first time in six months.
While slashing interest rates to a record low of 1%, the European Central Bank said on May 07 that it plans to spend about 60 billion euros ($80 billion) to buy covered bank bonds in a bid to stem euro zone's economic decline. Following the announcement, the euro jumped more than 1% against the dollar.
Financial markets also reacted positively to the official results of the government's stress tests of the nation's 19 largest financial firms, which were released after the close of trading on May 7.
U.S. bank regulators said about half of the country's biggest financial institutions need to improve their capital positions in order to ensure that they can weather a further downturn in the economy. 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.
Thus far, the dollar has lost 6% against the euro from a 5-week high.
The dollar, which closed last week's trading at 1.1065 against the Swiss franc dropped to 1.1024 during Asian deals on Monday. This set the lowest point for the dollar since January 09. On the downside, 1.07 is seen as the next target level for the dollar.
The dollar has depreciated 6% against the franc since reaching a 1-month high of 1.1744 on April 20.
In Asian trading on Monday, the dollar slumped to a 5-day low of 98.19 against the Japanese yen. The next downside target for the dollar-yen pair is seen around the 96 level.
The dollar-yen pair rose to near a 3-week high of 99.76 on May 07 as the yen was broadly lower against its major counterparts last week, as increased risk preference spurred investment in high-yielding assets, leading to a surge in carry trade activity.
But the dollar pared its gains on Friday after the U.S. jobs report was released, and closed last week's deals at 98.47.
Against the pound, the dollar fell to near a new multi-month low of 1.5249 during Asian deals on Monday. If the dollar edges down further, it may likely target the 1.538 level. The pound-dollar pair was worth 1.5241 at last week's close.
The U.K. currency gained 2% against the dollar last week as the pace of decline in UK's construction sector activities slowed notably in April and the household confidence rose at the fastest pace in almost two years in April as global equity markets showed strong recovery and the country's housing market displayed some tentative signs of improvement.
According to Nationwide Building Society, the U.K. consumer confidence index rose eight points to 50 in April, marking the largest single monthly rise for nearly two years. Economists had expected a slight increase to 43 from March's reading of 42.
The CIPS/Markit construction purchasing managers' index jumped to 38.1 in April from 30.9 in March, marking the highest reading in seven months. Meanwhile, economists had forecast a slight increase to 31.9.
The dollar also tumbled to fresh multi-month lows against its Australian, New Zealand and Canadian counterparts in Asian deals today.
The U.S. dollar plummeted to fresh 6-month lows of 1.1480 against the Canadian dollar and 0.6116 against the New Zealand dollar. If the greenback falls further, it may likely target 1.131 against the loonie and 0.636 against the kiwi. The greenback-loonie and the kiwi-greenback pairs were worth 1.1512 and 0.6041, respectively at Friday's close.
Against the Aussie, the U.S. currency slipped to a new 7-month low of 0.7716 during Asian deals today. The next downside target for the greenback is seen around the 0.78 level. At last week's close, the aussie-greenback pair was quoted at 0.7685.
In the upcoming European session, the French and the Italian industrial production reports for March are expected.
There are no significant economic reports due to be released from U.S.
From Canada, the new housing price index report for March has been slated for release at 8:30 am ET.
For comments and feedback: contact email@example.com