8 May 2006, 13:57  Dollar slumps to yr lows vs euro, 7-mth lows vs yen on weak US jobs data

The dollar slumped to year lows against the euro and the pound and to over seven month lows against the yen, continuing losses late last week sparked by Friday's very weak US employment data. The figures showed US non-farm payrolls rose by just 138,000 in April, well below market expectations for a 200,000 increase, intensifying speculation that the Federal Reserve will stop raising interest rates after a final quarter-point hike to 5.0 pct on Wednesday. "The soft April jobs report at the end of last week appeared to seal the case for only one more interest rate hike from the Fed before a pause," said Mitul Kotecha at CALYON. US trade data due on Friday are also seen as a potentially major event risk for the dollar. In a market which is increasingly turning its attention to global imbalances, a further widening of the US trade deficit "could bode badly for the dollar", Kotecha said. Elsewhere, the yen rose to seven and a half month highs against the dollar after comments by Bank of Japan governor Toshihiko Fukui suggesting that Japanese interest rates could start to rise soon. Speaking to reporters before the meeting of G10 central bankers at the Bank for International Settlements yesterday, Fukui said the first stage of the BoJ's move away from quantitative easing is nearing completion and that excess liquidity in the Japanese economy will be gone in "a few weeks".

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