Market News

The U.S. Labor Department data released on Thursday, April 24, 2008 showed that unemployment benefit claims for last week dropped by 33,000 to 342,000, better than the increase of 3,000 which was expected by most economists. This data, coupled with expectations that the U.S. Federal Reserve may soon be ending their rate cutting cycle, helped the U.S. Dollar to hover around close ranges against major currencies on Friday morning in trading in Tokyo.

Following speculation that the U.S. Federal Reserve may not cut interest rates further, the U.S. dollar surged against the Yen and the Euro in Thursday’s afternoon trading in Asia. However many traders expect the Fed to cut interest rates by as little as 25 basis points next week and will attempt to keep interest rates steady going forward in order to curb inflation.

On Wednesday, investors in Asia appeared to be anxiously waiting for next weeks’ meeting of the FOMC, and as a result there was little change in the U.S. Dollar in afternoon trading. On April 30, 2008, the federal policy makers will meet to discuss interest rates. Analysts are already predicting that during this meeting the Federal Reserve will cut interest rates by at least 25 basis points.

Since inflation in the Euro zone continue to rise, it appears that the ECB (European Central Bank) will not cut interest rates any time soon, and as a result, the U.S. Dollar almost fell to a record low against the Euro in mid-day trading in Hong Kong on April 22, 2008. In March, Euro zone inflation rose by 3.5%, the fastest jump since 1992 and higher than the 2% target set by the ECB.

Following Wall Street’s rally last Friday, April 18, 2008 and the hopes that the liquidity crisis may be over, the U.S. Dollar traded firmly against major currencies in early trading on Monday in Sydney. On April 21, 2008 at 10:10 am (00:10 GMT) the U.S. Dollar traded at 103.88 Yen, compared to 103.67 Yen, while the Euro traded at $1.5808 compared to $1.5818 in late trading on Friday in New York.

As predicted by analysts, the Euro surged against the U.S. Dollar because of lack of a concerted effort by the G7 to halt deprecation of the U.S. Dollar against major currencies. In addition, investors believe that poor economic conditions in the U.S. coupled with the liquidity crisis will necessitate the Federal Reserve to cut interest rates from the current level of 2.25%.

Investors are speculating that the U.S. Federal Reserve will cut interest rates soon, and as a result, the U.S. Dollar dropped against the Yen and the Euro during afternoon trading in Asia on Wednesday. Analysts believe that the Federal Reserve Bank will cut key the interest rate by almost 50 basis points during their meeting later this month, to spur an economy that is likely to slide into recession by the middle of this year.

During the G7 meeting in Washington yesterday investors were under the impression that group will intervene in the foreign exchange market to stabilize the U.S. Dollar. However, shortly after the meeting it became clear on Monday, April 14, 2008 that no concerted effort would be taken by the G7 to prop up the U.S. Dollar, and as a result investors moved out of the Dollar and into other currencies.

Following the decision by the (ECB to keep interest rates unchanged at 4%, the U.S. Dollar fell against major currencies. On April 12, 2008 at 10:50 am (00:50 GMT) in Sydney, the Euro traded at $1.5763 compared to $1.5742 while the U.S. Dollar traded at 101.88 Yen compared to 101.95 Yen in late trading in New York.

Traders in the forex markets are anxiously waiting for today’s interest rate decisions by the Bank of England (BoE) and the European Central Bank (ECB). They expect the ECB to hold interest rates steady, at the current level of 4%, while the BoE is expected to reduce interest rates to 5% in order to address the liquidity crisis facing financial institutions.

Finance ministers from Japan and other Euro Zone countries are gathering for the upcoming G7 meeting schedule for next week. The finance ministers seek to put a halt to excessive foreign exchange movements, resulted from growing concerns over the U.S. economy and the ever weakening U.S. Dollar, in the wake of the sub-prime crisis. Last month, the U.S. dollar fell to its lowest level in 13 years against the Yen, and at one point, closed at a historical low of $1.5906 versus the Euro.

On Friday, April 4, 2008, in Singapore the U.S. Dollar was steady against major currencies, as traders anxiously await the release of March job data later expected to be released later today in the United States. Many economists predict that non-farm jobs will drop by at least 50% and that the unemployment rate will be 5% compared to 63,000 job losses reported in February and an unemployment rate of 4.8%. According to recent data, the weekly jobless claims increased by 407,000, which is a two year high. This increase suggests greater job losses than expected.

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.