Dollar slides as European data signals recovery
March 31, 2010
NEW YORK—The dollar slipped in morning trading in New York Wednesday after several reports from Europe suggested a strengthening economy in the 16 nations using the euro.
Meanwhile, a payroll company's report on U.S. private-sector jobs showed the labor market still shrinking.
The 16-nation euro rose to $1.3516 from $1.3419 late Tuesday. It has circled 10-month lows this week as concerns persist over indebted Greece's high borrowing costs.
Just last November, the euro traded above $1.51.
Meanwhile, the British pound rose to $1.5141 from $1.5061, while the dollar gained to 92.96 Japanese yen from 92.82 yen.
In the U.S. Wednesday, payrolls company Automatic Data Processing said private employers cut 23,000 jobs in March. Economists surveyed by Thomson Reuters had expected the report would show employers added 40,000 jobs.
ADP's disappointing report comes before the release of the Labor Department's employment data Friday. Economists are still forecasting an uptick in employment -- 190,000 job gains in March, thanks in part to the federal government adding temporary jobs for the U.S. Census. Economists expect the unemployment rate remained at 9.7 percent this month.
Better economic data came from Europe. Germany said Wednesday its unemployment rate dipped to 8.5 percent this month from 8.7 percent in February -- although unemployment rose to 10 percent from 9.9 percent in the 16 countries using the euro. Germany is Europe's biggest economy.
Inflation in the 16 countries that use the euro also spiked to 1.5 percent in March, the highest level in 15 months. If prices keep rising, the European Central Bank could raise interest rates sooner than expected, which would boost the value of the euro.
Higher interest rates can tamp down inflation and slow economic growth, but they also tend to boost currencies. As the economy recovers, investors will likely transfer funds out of safe-haven currencies such as the yen and dollar to where they can earn higher returns.
Many analysts expect the Federal Reserve to hike U.S. rates from their current range near zero before the ECB begins raising rates amid problems with debt in Greece and other European countries.
Earlier this week, Greece was able successfully to raise more money from bond sales, but markets demanded high interest rates for holding its debt.
Greece is paying roughly twice in interest to borrow what Germany pays, despite a promised backstop from other governments using the euro.
March 31, 2010
NEW YORK—The dollar slipped in morning trading in New York Wednesday after several reports from Europe suggested a strengthening economy in the 16 nations using the euro.
Meanwhile, a payroll company's report on U.S. private-sector jobs showed the labor market still shrinking.
The 16-nation euro rose to $1.3516 from $1.3419 late Tuesday. It has circled 10-month lows this week as concerns persist over indebted Greece's high borrowing costs.
Just last November, the euro traded above $1.51.
Meanwhile, the British pound rose to $1.5141 from $1.5061, while the dollar gained to 92.96 Japanese yen from 92.82 yen.
In the U.S. Wednesday, payrolls company Automatic Data Processing said private employers cut 23,000 jobs in March. Economists surveyed by Thomson Reuters had expected the report would show employers added 40,000 jobs.
ADP's disappointing report comes before the release of the Labor Department's employment data Friday. Economists are still forecasting an uptick in employment -- 190,000 job gains in March, thanks in part to the federal government adding temporary jobs for the U.S. Census. Economists expect the unemployment rate remained at 9.7 percent this month.
Better economic data came from Europe. Germany said Wednesday its unemployment rate dipped to 8.5 percent this month from 8.7 percent in February -- although unemployment rose to 10 percent from 9.9 percent in the 16 countries using the euro. Germany is Europe's biggest economy.
Inflation in the 16 countries that use the euro also spiked to 1.5 percent in March, the highest level in 15 months. If prices keep rising, the European Central Bank could raise interest rates sooner than expected, which would boost the value of the euro.
Higher interest rates can tamp down inflation and slow economic growth, but they also tend to boost currencies. As the economy recovers, investors will likely transfer funds out of safe-haven currencies such as the yen and dollar to where they can earn higher returns.
Many analysts expect the Federal Reserve to hike U.S. rates from their current range near zero before the ECB begins raising rates amid problems with debt in Greece and other European countries.
Earlier this week, Greece was able successfully to raise more money from bond sales, but markets demanded high interest rates for holding its debt.
Greece is paying roughly twice in interest to borrow what Germany pays, despite a promised backstop from other governments using the euro.