The euro soared to a six-week high against the dollar and a five-week peak as compared to the yen last week which was aided by tighter money market conditions in the zone along with the yen which bolstered the investment tolerance for putting more risk in the currency.
The European economy despite the problems it faces remained resilient as shown in better-than-expected U.S. non-farm payrolls report, constant reiteration by European monetary officials that interest rates would indubitably remain low for the remaining weeks for the year. The euro is still within striking distance of its yearly highs.
China reported that its trade numbers over the weekend were way above the forecasts last month which have raised 12.7 % from a year earlier while its imports also were up 5.3 %.
The strong labour data out of the U.S. as well as the vigorous trade balance numbers from China indicates that the global growth may be much better than the previous consensus according to analysts.
The euro was able to maintain its short term interest rates in the euro zone market as it edged up with the chances of more easing by the ECB which at present looks relatively slim. Last week, the U.S. labour market report has been selling the dollar and yen accordingly as provided for by the rates in the CitiFX’s flow report.
The dollar tracked as a result of the lower U.S. Treasury yields which failed to get enough momentum from the U.S. payrolls number wherein more employees were hired driving the jobless rate to a five-year low of 7.0 %.
However, the jobs number was not as vigorous enough to raise markets to price in an immediate withdrawal of monetary stimulus by the Fed. As a result, U.S. Treasury yields drastically fell dragging along the dollar with it.
The Fed will still have to work hard in order to push out the expectations for much higher rates as it will begin to taper its decisions to lower the economic threshold. In this environment, the expectation of the U.S. dollar is relatively stronger.
A Reuter’s poll revealed that Wall Street firms expect the Fed to begin lessening its hefty bond-purchasing programme no later than March of next year although there are only a handful of companies expect action as early as next week. Moreover, the speeches by the Fed policy makers were keen to hear any indications when tapering will begin.
The dollar fell to a 1-1/2 month low against the safe-haven Swiss franc, which was simultaneously supported by growing signs that deflation in the Swiss market, was narrowing and that the economy was significantly on the rise.
Against the yen, the dollar was able to hold its ground at 103.08 yen which was up 0.2 % after Friday’s 1.1 % rally which was not that far from its six-month peak of 103.38 last week. Finally, the yen continued to underperform on the Bank of Japan’s tight losing monetary policy and the pick-up in the risk enthusiasm.