[B]Dollar Stronger versus Yen and Euro[/B]
Yellen backs Interest Rate Hike
The dollar was stronger on Friday following positive job reports and a weaker yen.
Europe’s shared currency lost 0.1 percent against the dollar falling to 1.1366 dollars after reaching its highest level since October of 2016 at 1.1454 on Thursday.
The US dollar was supported by the Labour Department’s report showing that initial claims for state unemployment benefits were lower by 9,000 last week, to a seasonally adjusted 267,000 for the week ending April 2nd. Expectations had been on benefits dropping to 270,000.
Unemployment has been blow 300,000 – the threshold which separates between a healthy and unhealthy economy – for 57 weeks, the longest continuous time since 1973.
“The persistently low level of claims should provide some reassurance that the economy is growing, even if that growth still appears more sluggish than most would have hoped a few months ago” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Michigan.
The market is still on watch for the possibility of more rate hikes and their timing, Fed Chair Janet Yellen has said that the economy can’t take many hikes this year due to faltering global economy which can threaten the US economy, the US market however is starting to show signs of improvement which could support more hikes.
“The labour market is on a solid footing. Layoffs are low, hiring is good, and workers who do lose their jobs are finding new ones quickly”, said Gus Faucher, deputy chief economist in Pittsburgh.
On Thursday Yellen took the stage in New York with the two previous Fed Chairs, Ben Bernanke and Paul Volcker who appeared together for the first time at a New York non-profit residence for students.
“The US economy has continued to progress in a satisfactory way. We continue to see good job performance, some evidence of inflation moving up, so that was our expectation when we raised rates in December” she said, “So yes, there is accommodation in the monetary policy that we have. But we think the gradual path of rate increases will be appropriate… we remain on a reasonable path and I don’t think December was a mistake”.
In December the Fed raised its rates for the first time in almost a decade.
The US dollar saw gains against the yen after Japanese Finance Minister Taro Aso said that rapid forex moves are not helping and yen moves are one sided hence Japan would take steps to improve the situation. Following the statement the yen fell against the US dollar by 0.4 percent with the dollar trading at 108.67 yen, after the dollar fell to its weakest level since October of 2014 at 107.57.
“More aggressive jawboning will be the near term option to maintain USD/JPY above 105” said ING strategists.
The yen fell against the euro by 0.3 percent with the euro trading at 123.47 yen, and is expected to lose up to 2.9 percent for the week.
The US dollar index which measures the greenback against a basket of six major currencies added 0.1 percent to 94.579.