US Dollar Weakens as US and Canada Report Job Losses

Posted January 08, 2010

The US dollar fell against the euro and yen as reports show job losses in December. Canada’s dollar held steady after also reporting job cuts for the same time period. The Australian and New Zealand dollars weakened against the euro. Chile’s peso rose against the US dollar as the Chilean economic recovery gains speed with rising copper prices. The South African rand fell as gold prices declined.

 

In an unexpected turn of events, both Canada and the United States reported job losses for December. US employers cut 85,000 jobs and Canada cut 2,600 jobs. Canada’s number was especially surprising since jobs were added in November.

The US dollar fell by .7 percent against the euro in response to the jobs numbers and slid to $1.4415. It also fell against the yen to 92.87 yen.

The jobs numbers reaffirm the US benchmark interest rate will remain at zero until at least June 2010. In addition, the US Federal Reserve may need to extend stimulus measures it had been considering exiting.  The unemployment rate as reported by the US Department of Labor remains at 10 percent. The numbers were a great disappointment to many people who had been expecting zero to a positive number of jobs to be reported.

The Canadian dollar held steady at C$1.0355 against the US dollar. The dollar had weakened late yesterday New York time to C$1.0347 for the first time in the last six days as the price of crude oil for February delivery dropped to $82.26 per barrel.

The Canadian benchmark interest rate is at .25 percent and the central bank has already indicated the rate will be kept the same until June 2010. When it is raised, the bets are the rate will go up to .75 percent. In the US the expectation is the interest rate will be raised to .5 percent.

Of course there is much that can happen over the next five months as global economic recovery remains weak.

The euro fell against the US dollar to 133.13 yen per euro. The Australian dollar weakened to 85.49 yen and the New Zealand dollar fell to 68.33 yen.  Traders are speculating that carry trades will be reduced. Japan’s benchmark interest rate is at .1 percent making it a target of carry trade transactions.

The Brazil real strengthened for the first time in the last four days in response to the US jobs numbers. The bets are now clearly that the interest rates will stay near zero through the second quarter of 2010. The real appreciated to 1.7364 against the US dollar. The Brazilian benchmark interest rate is at 8.75 percent.

In other currency news, the Polish zloty advanced to 4.1026 against the euro for a .4 percent increase. The zloty was responding to a report by the Pacific Investment Management Co. that predicted growth in returns on investments in certain countries. The countries specifically mentioned are Poland, Mexico, and South Korea.

Chile’s peso advanced to 491.58 against the US dollar. The peso appears on track for a weekly gain. It has been two months since the peso has seen a weekly gain. The peso is advancing as commodity prices, including cooper, rise. Copper is Chile’s largest export. The Chilean President, Michelle Bachelet, has publicly stated the country is poised to see for economic recovery.

The South African rand weakened against the US dollar as gold prices fell to $1,120.31 per ounce in US dollars. This is the first time the rand has fallen in three weeks when paired against the US dollar.

The rand fell to 7.4212 rand per US dollar.

 

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