The dollar surged to its highest level in 7 months against its peers on Friday following the release of a better than forecast US jobs data which fueled predictions for a rate increase by the Federal Reserve for December. The US economy gained 271,000 jobs in October beating forecasts by analysts of 180,000 which marked its biggest gain since December. The US unemployment rate dropped to its lowest level in 7.5 years at 5.0% in October from 5.1% in September. Fed Chair Yellen had remarked that the US economy was posting good numbers and soon to be released figures could substantiate a rate hike for next month. The US Dollar Index was up 1.23% trading at 99.29 towards Friday’s close at its highest level since April 15 closing out the week up 2.31%.
The euro weakened against the dollar to 7 month lows with the pair trading at 1.0740 towards Friday’s close after having come off its session low of 1.0708. Solid US jobs data boosted dollar demand as the market expects an imminent rate hike by the Fed which would be the Fed’s first rate increase in almost a decade. After remarks from European Central Bank President Mario Draghi made last week the market speculates that the ECB will increase its asset purchasing scheme already at EUR 1.1 trillion.
The pound weakened against the dollar also to 7 month lows with the pair trading at 1.5054 towards Friday’s close down 1.5054. The pound was still facing pressing after having declined over 1% against the dollar on Thursday following an announcement from the Bank of England which revealed the central bank lowering its outlook on growth and inflation for 2015 and 2016, indicating that its key interest rate will most probably remain unchanged for the time being. The pound overlooked data which revealed that UK industrial production declined 0.2% in September compounding forecasts of a 0.1% drop.
The yen weakened against the dollar to 2.5 month lows with the pair up 1.16% trading at 123.15 towards Friday’s close. The pair closed out the week up 2.2% marking its greatest weekly advance since September. Kuroda of the Bank of Japan cautioned that a greater than forecast drawdown of China’s economy and other emerging economies presented the greatest threat to Japan’s economy. Kuroda confirmed that the BOJ is prepared to ramp up its stimulus program in order to boost Japan’s economy even though its 2% target for inflation can be reached without it.
The Australian and New Zealand dollars weakened against the greenback. The Aussie was down 1.36% against the dollar with the pair trading at 0.7045 towards Friday’s close. The kiwi dollar tanked 1.42% against the greenback with the pair trading at 0.6520 towards Friday’s close. The Reserve Bank of Australia reduced its outlook on inflation from 2.5% to 2.0% for most of next year.
The Canadian dollar weakened against the greenback with the pair up 0.97% trading at 1.3294 towards Friday’s close. Statistics Canada released data which revealed that the number of employed individuals increased by 44,400 in October ahead of forecasts for an increase of 10,000 following a gain of 12,100 in September. Canada’s unemployment rate slid down from 7.1% in September to 7.0% in October. Canada’s building permits declined 6.7% in September compounding forecasts for a 1.3% increase.
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