Following the release of data on U.S. job market which showed that employers shared more than expected jobs in March, the U.S. Dollar fell against major currencies. The data released showed that the economy lost about 80,000 jobs, the largest monthly decline in five years. This is the third consecutive job loss which confirms investors’ fears that the U.S. economy is in recession.
On Wednesday April 2, 2008, the Chairman of the Federal Reserve Bank hinted that the United States economy may beheading towards recession in the first half of the year, but will rebound in the second half through 2009. Despite this news, the U.S. Dollar firmed following good news coming from the labor market, which said that private sector jobs increased in March 2008 by 8,000 compared to 70,000 loss originally expected by economists.
Late Tuesday, April 1, 2008, the U.S. Dollar showed slight gains, based partly on the news that Lehman Brothers Holding and UBS Switzerland have issued new shares to support their balance sheets. The offerings by these two investment banks were well received by investors. In addition, the U.S. Dollar was helped by better-than-expected data released by the Institute of Supply Management, which shows that the U.S. manufacturing sector index rose from 48.3 for the month of February to 48.6 for the month of March, which is better than the expected decline to 47.5.
Investors in Asia are speculative that the European Commercial Bank will not cut interest rates because of the rise in inflation, and as a result, the U.S. Dollar weakened in Asian markets on Tuesday, March 31, 2008. According to reports, consumer prices in the Euro Zone increased by 3.5% in March, which is significantly higher than the 2% target set by the European Commercial Bank. This increase is also the highest in 15 years and it confirms investors’ speculation that the European Commercial Bank will hold interest rates steady.
On March 31, 2008, in early trading in Sydney, the U.S. Dollar was mixed against most major currencies, however, traders believe that pressure will continue to mount on the U.S. Dollar until investors are confident that the liquidity crisis and the U.S. economy improves.
For some time, investors have been speculating that the European Central Bank (ECB) will need to increase interest rates due to a steady increase in inflation in the Euro Zone. This speculation was confirmed by comments made by Axel Weber, a member of the ECB. He said, “interest rates may need to be raised to contain ‘alarming’ prices.” As a result of these comments, the European 2-year Government Securities dropped.
On Friday, March 28, 2008, the Japanese Yen continue to strengthen against the U.S. Dollar because investors are concerned that the liquidity crisis in the U.S. financial market will not be over soon. Consequently, U.S. stocks, especially the financial shares, fell and the U.S. dollar dropped by 0.4% to 99.11 yen.
The U.S. Dollar continues to fall against major currencies in Asian trading this Friday, following the release of Japanese Consumer Price Index data for the month of February. On March 28, 2008, at 00:15 GMT in Sydney, the U.S. Dollar traded at 99.54 yen, compared to 99.68 yen late in New York on Thursday, while the Euro traded at $1.5808 compared to $1.5774 in late New York trading
The U.S. Dollar continued its fall against the yen in early trading on March 27, 2008 in Tokyo, after the release of poor economic data, which confirms the poor state of the U.S. economy. According to the U.S. Commerce Department, new durable goods orders decreased by 1.7%, which was worse than the increase of 0.7% which had been anticipated by economists. Also, reports on new house purchases fell by 1.8% in February 2008.
The U.S Dollar continues to fall against the Yen, after it was announced that last month’s exports from Japan grew faster than that of the previous month, even though the U.S. economy continues to falter. According to the report, although the U.S. economy is in a slump, exports from Japan grew 8.75% in February compared to 7.6% in January.
On Tuesday, March 25, 2008, in Sydney, the U.S dollar fell slightly against major currencies after yesterday’s gains resulting from improved investor’s sentiment about the U.S. economy. In early trading (00:15 GMT), the U.S. dollar traded at 100.72 yen, compared to 100.75 yen, and the Euro traded at $1.5436 compare to $1.5424.
On Monday, March 24, 2008 in Asia, the U.S. Dollar gained on the Euro after hitting record lows last week. Due to the Easter Holiday in the United States and Europe, trading activities was very light in Asia as most investors are waiting for the U.S. market to resume trading later today.
Since the beginning of the year, there has been speculation that foreign investors, especially those in Asia, have reduced their purchase of U.S. assets. Recent declines in the value of the U.S. Dollar and the interest rate cuts by the Federal Reserve have heightened this speculation.
As a result of the long Easter holiday, foreign exchanges in Europe and the U.S. were closed for Good Friday, and the U.S. Dollar did not fluctuate much against major currencies as Asian investors did not fully participate in the absence of major players from the U.S. and Europe.
Investors continue to be concerned about the extent of the liquidity crisis and whether more financial institutions will fall victim to the credit crunch. Consequently, investors are beginning to move into safe haven currencies such as the Yen and the Swiss Franc, resulting in the U.S. 3-Month Treasury rates falling to 55 basis points. On Friday, the U.S. 3-Month Treasury rate was as high as 1.20%, but the demise of Bear Stearns triggered the fall to its lowest level in more than 50 years.