US Job Reports Cause Dollar to Fall

United States labour reports came out today and showed slower than expected growth. Economists had previously estimated that jobs would have to grow by at least 100,000 in the month of May to avoid a recession. Instead, investors are faced with a month that only showed a growth of 69,000 jobs. This number is far less than the 150,000 expected and does not even meet the minimum requirements mentioned by economists. As a result of this report, the euro and dollar short position has now hit its record high.

For investors betting on the euro, the labor report may come as marginally good news. After the numbers were released by the United States Bureau of Labor Statistics this morning, the euro bounced back from its 23 month low against the United States dollar.

The dismal job growth in the United States has fueled talks that the Federal Reserve may start more quantitative easing measures. Less than optimal manufacturing reports, consumer confidence indications and falling job growth have served to further harm the weak United States economy. To make the United States economic situation worse, unemployment has now risen for the first time since June of last year.

Euro Bounces Back

The euro spent most of the week hovering around 23 month lows. Continued debt crises and recapitalizations in Europe served to depreciate the value of the euro. In response, investors fled to safe havens like the yen and the United States dollar. The one good thing that comes of the United States labor report is the improved euro. After the United States announced its labor numbers, the euro improved from its record lows.

Over the course of the month of May, the euro dropped a total of 7 percent. Rumors that the IMF was developing a contingency plan for the Spanish debt crises fueled the drastic swing of highs and lows experienced by investors this week.

Possible Quantitative Easing?

With the rising unemployment rate and dearth of jobs, the Federal Reserve now possesses the political capital it needs to take action. Market analysts are eyeing possible quantitative easing measures that might be taken by the Federal Reserve. Today the dollar fell 0.27 percent to land at a rate of 78.14 yen. The lowest it reached during the day’s trading was 77.65. This number marks the lowest value for the dollar since the middle of February.

The dollar could have fallen farther, but rumors flooded the market about a possible intervention by the Japanese government. To keep their exports strong, the Japanese government has attempted to keep the yen undervalued in recent years. With the current falling value of the dollar and euro, investors believed that the Japanese would further devalue their currency to keep up. Once rumors dissipated, the dollar fell again against the Japanese yen.

Japan has issued statements in the past detailing their intent to take action against an overvalued currency. Speculators have turned to the yen in recent weeks as a safe haven from the tumultuous financial market. As a result, the value of the yen has climbed to the chagrin of the Japanese government. 

The Euro Begins to Stabilize

After a wild week of trading, the euro is showing some signs of stabilizing. Greek opinion polls show that the pro-bailout party is likely to win the June 17 election. If this party wins the election, investors believe that Greece will stay in the European Union and accept bailout money.

At the lowest point of the week, the euro traded at a little less than $1.23. The United States labor report boosted the value of the euro from this low and is likely to continue to support the value of the euro over the next month. Short positions were taken by many currency speculators in the marketplace. Analysts expect that some of these investors may buy back the difference over the course of this weekend.

Overall, the euro was up 0.40 percent. It recovered from its lowest value since July of 2010 to finish at $1.2406.  The euro may still be in for a few more fluctuations in the future. Even if the G20 and the Eurozone figure out a debt crisis solution, investors will unload riskier euro purchases as the market improves. This means that it could be another few weeks before the euro improves noticeably.