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Will rampant U.S. unemployment trigger a dollar decline?

*Bloomberg, by Kim-Mai Cutler & Ron Harui, March 6, 2009

“The dollar fell against the euro and the yen before a government report that may show the U.S. lost the most jobs last month since 1949.

The U.S. currency weakened for a second day against the yen before the Labor Department report, which may show the unemployment rate rose in February to a 25-year high as payrolls fell by 650,000. The euro strengthened on speculation European investors will repatriate profits before the end of the first quarter on March 31. The Swiss franc gained against all 16 of its most-traded counterparts.

‘There’s going to be a horrific employment report in the U.S.,’ said Lee Hardman, a London-based currency strategist at Bank of Tokyo-Mitsubishi Ltd. ‘There are signs now in the market that the dollar is becoming more vulnerable.’

The dollar dropped to $1.2683 per euro as of 7:06 a.m. in New York, from $1.2540 yesterday. The decline was the biggest since Feb. 24. The U.S. currency slid to 97.13 yen from 98.07 yen. The euro rose to 123.16 per yen from 123.00, and to 89.07 British pence from 88.82.

The unemployment rate probably surged to 7.9 percent, according to the median estimates in a Bloomberg News survey. The Labor Department is scheduled to release the data at 8:30 a.m. in Washington.

The Dollar Index, which the ICE uses to track the currency’s performance against those of the U.S.’s major trading partners, fell 0.9 percent, the most in two weeks, to 88.245, from 89.105.

The dollar rose 10 percent against the euro this year and 7 percent versus the yen as investors sought a refuge from the global financial turmoil that has caused banks to rack up $1.2 trillion of writedowns and losses since the start of 2007.

‘Artificial’ Rally

‘The rally has been in part artificial leading to a divergence between the dollar and the U.S. economic fundamentals,’ Hardman wrote in a note today. ‘The sharp sell off in the dollar today on speculation of an exceptionally weak employment report is perhaps an early warning sign that the turning point for the dollar is edging closer.’ “

*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.