Thread: Dollar Set for Worst Weekly Loss vs Euro Since March

Dollar Set for Worst Weekly Loss vs Euro Since March

Friday, June 6, 2008 2:03 PM



NEW YORK -- The dollar fell across the board Friday as a big jump in the U.S. jobless rate underscored the economy's weakness, which could prevent the Federal Reserve from raising interest rates later this year.

The Labor Department report, which also showed job losses for a fifth straight month, further undermined the outlook for the dollar, whose interest rate yield has shrunk as the Federal Reserve slashed benchmark overnight rates by a total of 325 basis points since September.

The data also revived debates about the chances of a U.S. recession, and analysts said the Fed may have to address the economy's persistent sluggishness with another quarter-point easing.

"Today's unemployment report was the first time in recent memory that the unemployment rate overshadowed the non-farm payrolls number," said Michael Woolfolk, senior currency strategist, at Bank of New York Mellon in New York.

"While too much should not be made of one number, particularly with strong seasonals a factor during the spring, players were looking for a catalyst to continue selling the dollar after Trichet's hawkish remarks yesterday and a record surge in crude oil prices over the past 24 hours," he added.

The dollar on Thursday suffered a blow after European Central Bank President Jean-Claude Trichet shocked markets by saying the bank may hike interest rates next month to stem inflationary pressures. That should beef up demand for euro zone assets and the region's currency.

In midday trading, the euro gained 0.9 percent versus the dollar to $1.5728. The single euro zone currency was on track to post its best weekly gain since late March.

Against the yen, the dollar fell to 105.82 yen from 106.30 yen.

The New York Board of Trade's dollar index fell to a two-week low at 72.426, before trading back up to 72.523 , down 0.8 percent on the day.

The dollar fell to 1.0210 Swiss francs, the lowest since April 24. It last traded at 1.0234 francs, down 1.4 percent from late on Thursday.

U.S. oil prices soared more than $6 a barrel to over $134 on Friday, pushing gains in the last two days to $12 and benefiting from a weak dollar. U.S. stocks also posted steep losses on the day.

In the wake of the jobs report, the interest rate futures market expects the Fed to hold benchmark interest rates steady this month, while chances for a rate hike by October fell to about 56 percent from as high as 82 percent earlier.

The Labor Department reported on Friday that the unemployment rate rose to 5.5 percent last month from 5.0 percent in April and was at the highest rate since October 2004.

U.S. non-farm payroll job losses last month were 49,000. Markets had predicted that the economy would shed 58,000 jobs for May.

Before Trichet's remarks and Friday's jobs numbers, the dollar had been on a steady path to recovery. Remarks by Fed Chairman Ben Bernanke earlier this week expressing concern about the inflationary impact of the dollar's weakness had fueled rebound in the dollar.

But for now, the dollar's recovery has been put on hold.

"The one-two punch of ECB President Trichet yesterday and the payrolls report today has generated a sharp reversal in currency market sentiment," said Nick Bennenbroek, head of currency strategy, at Wells Fargo in New York.

http://moneynews.newsmax.com/markets/do ... 02344.html

See you all in the bread line .... you are watching a failed state in the making and it was all done deliberately

what is amazing to me is most of the senior citizens that want the war in Iraq to continue are going to throw a hissy fit and it is going to be very, very soon..

what they don't understand is when the economy collapses and they don't get their social security checks they will have no one but themselves to blame

It certainly will not be the first time a nation collapses because rulers exhausted the coffers on war efforts, overtaxed their citizens, and threw the nation into debt.

W