Posted February 05, 2010
The US dollar rose against the euro and yen as the US unemployment rate falls. The yen strengthened against the euro as the European Commission deals with growing debt problems in several member nations. The Swiss franc fell against the euro after Swiss intervention in the currency market. The Canadian dollar strengthened against the US dollar. Asian currencies generally fell against the US dollar. China concentrates on domestic consumption and will prevent further yuan appreciation.
The US dollar fell slightly on 4-February-2010 against the euro only to rebound early the next morning after the U.S. Department of Labor issued a report on the state of jobs and unemployment.
The dollar strengthened to $1.3648 against the euro and to 89.43 against the yen.
The number of jobs in the U.S. declined in December by 20,000, yet the unemployment rate fell to 9.7 percent. Though the news about unemployment was well received, the happiness is probably not going to last. With unemployment still solidly hovering around 10 percent the recovery cannot get into full swing.
The yen strengthened against the euro to 122.28 yen per euro which was a 3.4 percent gain in a single day. The euro is currently embattled due to the debt problems in Greece, Spain, and Portugal. Greece is particularly in dire need of financial assistance but has not asked for it yet. Investors in the meantime are leaving the euro for safer currencies until the European Commission decides on specific actions.
In addition, German industrial production declined in the month of December. Germany is the largest economy in the Euro-zone and signs of weakness are not good news for the common currency. The euro is expected to continue showing signs of weakness against the US dollar for the near term.
The Swiss franc fell against the euro on speculation the Swiss central bank has once again intervened in the currency market. The Swiss are dealing with possible deflation and has indicated all along it will not allow the franc to become too strong.
The Swiss franc weakened to 1.4687 francs against the euro.
Oil has rebounded recently and is now at $73.48 per barrel for March deliveries. Oil prices fell a bit when the Swiss currency intervention weakened U.S. dollar gains against the euro.
With oil prices trending upward again, the Canadian dollar is rallying against the U.S. dollar. The loonie rose against most major currencies and reached C$1.0704 per U.S. dollar. Canada’s economy is improving at a faster clip then the economy of the U.S. with 43,000 jobs added in January. The unemployment rate in Canada is currently at 8.4 percent.
Asian currencies continued to weaken over concern about the debt problems in the European Union. Investors turned away from emerging market assets and returned to safer currencies like the yen, US dollar, and Canadian dollar.
The Singapore dollar weakened to S$1.4205 against the US dollar. The Malaysian ringgit continued its slide and fell 3.4405 ringgits per US dollar. The South Korean won also fell against the US dollar to 1,169.85.
With the continuing crisis in the Euro-Zone remaining unresolved the US dollar is expected to continue strengthening into next week.
The Chinese yuan is at 6.6670 yuan per dollar. China has been focusing on increasing domestic consumption which is what world policymakers have been asking for now for months. But with China’s attention turned to domestic consumption, it is expected countries importing to China will lose revenues.
China is expected to prevent further yuan appreciation.