The greenback posted a weekly gain against the single currency on speculation that the global economic recovery is faltering, boosting demand for the safe-haven U.S. currency. The Dollar Index rebounded from 78.334 on June 2 to reach the highest level since June 25 at 80.578 on Thursday after a report showed U.S. employers cut more jobs last month than economists forecast together with the jobless rate increased to 9.5% from 9.4%.
Euro rallied to as high as 1.4202 earlier this week after G8 sources said China had asked for discussion of proposals for a new global reserve currency at next week's G8 meeting in Italy, however, euro pared all the gains and fell to as low as 1.3927 on Friday as a European G8 source involved in preparations for the meeting said that the U.S. dollar's status as the top global reserve currency is unlikely to be mentioned explicitly in the final communique at next week's Group of Eight summit. A report on Friday also showed Europe’s service industry contracted at a faster pace in June.
The British pound fell from the 8-month high of 1.6745 to as low as 1.6301 on Friday after a report showed growth in U.K. service industries slowed in June as the recession persisted, giving the Bank of England more reason to keep borrowing costs at a record low.
The Japanese yen weakened against high-yielding currencies on Friday after Kyodo News reported Japan may consider investing about 10% of its public pension-reserve funds in assets with ‘high risks and high returns’. Euro and aussie rebounded against the Japanese yen from 133.58 to 134.83 and from 75.84 to 76.94 respectively. Japan’s pension-reserve balance was 123 trillion yen ($1.28 trillion) as of March 2009.
Economic data to be released next week include Japan’s leading indicators and U.S. ISM non-manufacturing on Monday; U.K. industrial and manufacturing production and German factory orders on Tuesday; U.K. Nationwide consumer confidence, Japan’s current account and economic watch, eurozone GDP and German industrial production on Wednesday; German CPI, HICP, current account and trade balance, U.K. trade balance and U.S. wholesale inventories on Thursday; Japan’s domestic CGPI, German WPI, U.S. trade balance and University of Michigan survey on Friday. Reserve Bank of Australia and Bank of England are expected to keep interest rate unchanged at 3.0% on Tuesday and at 0.5% on Thursday respectively.