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Currencies Direct March 26th 2009 - 3 minute read

  • NEW YORK (Dow Jones)–The yen fell to session lows versus the euro and dollar after the January U.S. jobs report boosted U.S. stocks futures and currency traders took advantage of the spark in risk appetite.
  • The yen is considered a safe-haven currency and typically declines against rivals during periods of greater risk appetite when equities rise.
  • The euro rose as high as Y117.70 and the dollar hit Y91.85.

  • The data results were worse than expected, but ‘nothing catastrophoic,’ said David Powell, a currency strategist at Bank of America in London. ‘There is already a very bad amount of news being priced into global equity markets, and this report doesn’t give us a new leg down in risk.’ Nonfarm payrolls in January tumbled 598,000, the U.S. Labor Department said Friday, the most since December 1974 and above the 525,000 drop Wall Street economists in a Dow Jones Newswires survey expected. December was revised to show an even steeper decline of 577,000.
  • The euro hit session highs against the dollar after the report. However, the common currency’s lead against the dollar is narrow. Alan Ruskin, head of international currency at RBS Greenwich Capital, noted that investors are also unwilling to let go of their riskier positions ahead of a press conference planned for Monday with new Treasury Secretary Timothy Geithner.
  • Elsewhere, Canada also reported disappointing employment data Friday, sending the Canadian dollar down sharply. Friday morning, the euro was at $1.2813 from $1.2798 late Thursday, while the dollar was at Y91.67 from Y91.18, according to EBS. The euro was at Y117.60 from Y116.76. The U.K. pound was at $1.4670 from $1.4635 and the dollar was at CHF1.1708 from CHF1.1706 late Thursday.
  • Overnight, the U.K. pound was pushed down from multi-week highs on the release of U.K. industrial-production data. The quarterly indicator hit its lowest level since U.K. factories operated a three-day week in 1974, the Office for National Statistics said. Industrial production data contribute 14.3% to U.K. economic growth.
  • The pound had earlier risen to almost a three-week high versus the dollar, $1.4767, and a two-month high versus the euro, GBP0.8663, on the Bank of England’s rate cut Thursday.
  • The BOE cut its key interest rate to a fresh record of 1% and gave no indication that it would be the last reduction.
  • Meanwhile, the European Central Bank left its key rate unchanged at 2%, as widely expected, although it indicated that it could cut rates in March. ‘Sentiment is key and for the moment the markets are backing the BOE and the U.K. government’s fiscal policy compared to the rigid stance from the ECB,’ said Mark O’Sullivan, head of trading at Currencies Direct UK in London.
  • Canada Morning

 

  • The Canadian dollar dropped rapidly in response to news that Canada lost 129,000 jobs in January, sharply weaker than the expected loss of 40,000 and the largest single monthly job loss on record.

 

  • The U.S. dollar surged to the C$1.2478 area immediately after the 7 a.m. EST (1200 GMT) release from about C$1.2427 just before. It subsequently registered a session high at C$1.2541, its highest level since Jan. 23, before receding slightly, according to electronic trading system EBS.

 

  • The dollar was at C$1.2497 after the U.S. jobs report.

 

  • The unemployment rate in Canada reached 7.2% in January, the highest since November 2004.

 

  • Finance Minister Jim Flaherty warned of the grim report Thursday when he told reporters the numbers would be ‘very regrettable.’ But the actual results for the January data exceeded even the fears engendered by Flaherty’s remarks, said George Davis, chief technical analyst for foreign exchange at RBC Capital Markets in Toronto.

 

  • The sharp job loss in January will raise concerns that the Canadian economy is beginning to deteriorate more rapidly in line with the decline experienced in the U.S., he said. ‘I think the market’s going to be concerned that this catch-up phase is staring to be a little more pronounced,’ Davis said. Added BMO Capital Markets analysts: ‘This bleak report will likely prompt a March rate cut by the Bank of Canada.’ -By Riva Froymovich, Dow Jones Newswires; 201 938-5063; riva.froymovich@dowjones.com

 

  • (Don Curren in Toronto contributed to this report.)

 

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