The US dollar was beaten down after news that the U.S. economy lost a whopping 598,000 jobs in January, worse than expected. The unemployment rate jumped to 7.6 percent from 7.2 percent. The U.S. already lost about 2.6 million job last year and the US jobless claims data is at a 26-year high.
The Japanese yen softened slightly as investors bought riskier assets today on optimism ahead of a financial recovery plan to be revealed on February 9 by U.S. Treasury Secretary Timothy Geithner and President Obama. However, risk aversion will continue to provide support to the yen as the global economy is still in a deep recession mode.
The British pound extended its rally on optimism that UK interest rate cuts will help boost its economy faster than the rest of Europe. However, sterling gains were limited as UK industrial production fell sharply in December. Yesterday, the Bank of England slashed borrowing costs by 50 basis points to a record low of 1 percent. Sentiment for the sterling is still negative. The market is waiting to see if the BOE will consider quantitative easing to boost up the financial system.
Meanwhile, the European Central Bank is seen as behind the curve in monetary policy. Yesterday, the ECB left rates unchanged at 2 percent and indicated a likely rate cut in March. The euro dipped on news that German industrial production plunged to near 18-year lows.
The Australian dollar was supported on expectations of smaller interest rate cuts after the central bank said policies are now in place to boost the economy. The recent aggressive rate cut of 100 bps to a record low of 3.25 percent and the government's A$52 billion stimulus package provided a boost for the currency even as the central bank sharply slashed Australia's 2009 growth outlook.
The New Zealand dollar also gained as Asian stocks rose ahead of a financial recovery plan broadcast on February 9. However, any gains will likely be short-lived on recession worries.
The Canadian dollar tumbled as its own economy lost 129,000 jobs in January, adding worries that the country's economy is sagging. The monthly job loss was the worst on record. The jobless rate rose to 7.2 percent, a four-year high, from 6.6 percent in December. There is talk that Canada's government may need another stimulus package to lift its economy. The Bank of Canada already cut rates seven times since the end of 2007. The last rate cut was 50 basis points to 1 percent on January 20. The central bank's next meeting is on March 3.
10-Year Treasury Note Yield: 2.957
Dow Jones Industrial Average: 8197.27 +134.20