Jul 03 2009
The USD Soars on US Unemployment Data
The Dollar soared yesterday against most of its currency pairs, as its global reserve currency status returned to the forefront. This was due to weak U.S. unemployment figures, as Unemployment in the U.S. rose far higher than analysts had forecast. This spurred demand for safe-haven currencies, such as the USD and JPY. As a result of the strong USD, Crude Oil prices also tumbled. Today, investors should continue trading the USD, EUR, JPY, and Gold, as large profits will be made on market volatility.
The U.S Dollar gained about 1% versus the EUR and Canadian and New Zealand currencies Thursday after the U.S. government reported more job losses than expected, renewing concerns about the economy and enhancing the greenback’s safe-haven appeal. U.S. employers cut 467,000 jobs in June, far more than expected, while the Unemployment Rate rose to 9.5%, the government said in the report. The Dollar also benefited from a Chinese Foreign Ministry official’s comments, which dampened speculation about diversification of currency reserves.
It is important to take into account that yesterday’s data raised the risk aversion of investors, which also helped push the Yen higher vs. the USD. The Dollar finished trading at 95.95 Yen, from 96.60 Yen on Thursday. However, this week, the Dollar has advanced over 0.5% against the Yen.
The greenback faces some risks though. Analysts said that the weak U.S jobs report reinforced a trend already in place in the forex market prior to the release that the Dollar was oversold. Traders are still favoring foreign currencies over the U.S Dollar, and the sentiment remains to sell the USD in the short-medium term. With a light U.S. economic calendar today, currency investors may focus instead on the USD’s detriment, such as U.S. fiscal deficit and inflation.
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