Worse Than Expected US Employment Figures
On Friday the US dollar had an extremely bad day after US employment figures showed that US employers cut an unexpected 85,000 jobs in December. The dismal figures pared speculation that the Fed will raise rates anytime soon. The dollar pulled back from a four month high vs. the Japanese yen and the euro posted its biggest one day gain against the greenback. Most investors and traders were optimistic about the jobs report after November figures showed US employers cut fewer jobs since the global recession began and most expected the trend to continue. Samarjit Shankar of BNY Mellon in Boston said, “It was undoubtedly a disappointing number. It’s put a dent on rate hike expectations … and is a bit of a setback for investors who were looking for a relatively stable and smooth economic recovery. the U.S. still has a weak labor market, and until that gets turned around, you are not going to have a sustainable recovery.”
Fed Unlikely to Raise Rates
The euro gained 0.7% on the day trading at $1.4416 the biggest percentage rise since November. The ICE Futures U.S. dollar index which tracks the greenback against six major currencies fell 0.6% to 77.454. Interest rate futures traders have pared expectations that the Fed will raise rates anytime soon. They are now saying there is only a 22% chance the Fed will raise rates before mid 2010. Before the dismal jobs figures they had predicted a 40% chance the Fed would raise rates. Despite the jobs figures analysts say that the US economy has shown signs of growth and predict the dollar’s weakness will be brief. Vassili Serebriakov of Wells Fargo stated, “All together this report will probably work against the more optimistic expectations on the U.S. economy. It is negative for the dollar, and we are seeing it getting weaker. But we don’t expect to see a complete reversal in the dollar gains from last month based solely on this report. We need more data points.”
Japanese Finance Minister Retreats From Call For Weaker Yen
The dollar declined 0.7% against the yen trading at 92.67 yen. Japan’s new finance minister retreated from his call for a weaker yen after a rebuke from Japan’s Prime Minister which helped the yen in currency markets.
