Market Review - 08/05/2009 21:45 GMT
Dollar falls as save-haven demand drops on better-than-expected U.S. payrolls data
The greenback declined broadly on Friday after better-than-expected U.S. non-farm payrolls data bolstered hopes for an economic recovery and dented safe-haven demand for dollar. The ICE future dollar index (which measures the dollar's strength against a basket of six other major currencies) fell 1.75 percent to 82.417 in late New York trading.
The single currency rose to a six-week high against the dollar at 1.3652 on the back of strong U.S. economic data and rising stocks in Wall Street also boosted demand for riskier assets. Earlier in the day, a report showed German industrial production unexpectedly held steady in March, ending a six-month slump and adding signs that a recession in Europe's largest economy has reached a trough. Output in March was unchanged from February, when it slumped 3.4 percent.
U.K. producer prices jumped the most in 10 months in April. The price of goods at factory gates rose 0.6 percent last month, compared with a 0.1 percent gain in March. The British pound surged against the dollar to as high as 1.5250 in late New York session but weakened versus the euro and fell to a session low of 0.8974 as this week's Bank of England policy decision (unexpectedly expanded its asset purchase program by 50 billion pounds to 125 billion pounds) continued to weigh on sterling.
Commodity currencies such as New Zealand, Australian and Canadian dollars also strengthened against the greenback to multi-months highs of 0.6056, 0.7710 and 1.1490 respectively before stabilising.
On the data front, U.S. employers cut fewer jobs in April as signs emerged that the worst of the U.S. recession had passed and hiring for the next census boosted government staffing by the most since 2001. Non-farm payrolls fell by 539,000 in last month, after a 699,000 loss in March, but the jobless rate still jumped to 8.9 percent, the highest since September 1983.
Data to be released in the coming week include Australia NAB business confidence, Japan machine tools orders, and Canada new housing price index on Monday; German CPI, U.K. RICS house prices, trade balance, industrial production and manufacturing production, U.S. trade balance and Fed budget on Tuesday; Japan Economic watch DI and machine tool orders, U.K. claimant count and ILO unemployment, eurozone industrial production, and U.S. retail sales and business inventories on Wednesday; Switzerland's combined PPI, U.S. weekly jobless claims and PPI on Thursday; Japan Domestic CGPI and machine orders, German GDP, eurozone GDP and HICP, and U.S. CPI, Empire state manufacturing, real earnings, capacity utilisation and University of Michigan survey on Friday.
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