Here is the MTF FOREX weekly wrap up for June 6, 2008.
The US dollar fell on Friday as an unexpected surge in the US unemployment rates revived fears of a prolonged economic downturn in the US economy. Some feel this diminishes the chances of a Federal Reserve interest rate hikes by years end which many have been hoping for. This occurred even after a gain earlier in the week as the dollar rose based on Wednesday’s economic data which suggested a glimmer of hope for the world’s biggest economy.
The ADP employment data for May rose by 40,000 while the previous month’s figure was revised and changed to show a 13,000 gain rather than the 30,000 drop which was listed previously. Friday’s non-farm payrolls had been predicted to show another fall, but instead, US non-farm productivity was revised up to a 2.6% growth in the first quarter.
The day’s other US data came in fairly strong as well. Productivity has been revised up to a 2.6% increase in the first quarter, up from the previous estimate of 2.2%, as output was higher than previously predicted. Unit labour costs which are considered to be a gauge used to measure inflationary pressures, rose 2.2% in the first quarter, as previously estimated. This is 0.7% above the first quarter rate of 2007 which shows the lowest year on year increase in labour costs since 2004. The US ISM non-manufacturing composite index managed to hold on to most of April’s gain, falling back only slightly to 51.7 in May, from 52.0, while the prices paid index also climbed higher to 77.0, from 72.1. This reflects the latest increases in the price of oil, which hit a record of over $138 dollars a barrel this week, and other commodities as well.
European Central Bank officials appeared to leave little doubt that euro zone rates were set to rise next month, helping to set up the dollar for its worst weekly loss against the euro since late March. Pressure on the US currency was fueled by the dramatic jump in oil prices to this weeks record highs. There are some fears that soaring oil prices could further hamper the U.S. economy, while simultaneously fueling inflation.
Japan’s foreign exchange reserves dropped slightly to $996.98 billion at the end of May, falling below the $1 trillion level for the first time in four months due largely to declines in U.S. Treasury bond prices. Japan’s FOREX reserves, which are the second-largest in the world after China’s, sank $6.86 billion from late April for the second straight monthly slide, but the reserves still stood at the fourth-highest level on record at the end of the month. This is after hitting a record-high of $1.015 trillion in late March.
That’s the FOREX news for this week. Stay tuned for more to come in the following days.
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