Chinese Data Boosts Risk Appetite

The US dollar suffered a bad day on Monday as worse than expected US jobs data and comments from a Fed official who said rates are likely to remain low for some time put downward pressure on the dollar in currency markets. The dollar was also pressured by positive Chinese export data which boosted risk appetite. Last Friday the US labor Department reported that US employers cut 85,000 jobs which was disappointing to investors who had expected more positive jobs data from the US. On Monday St. Louis Federal Reserve Bank President James Bullard said that rates are likely to remain low for quite some time. Dag Muller of SEB in Stockholm stated, “The dollar went sour after the non-farm payrolls data. If the data didn’t meet expectations then it feeds the thought that there will be a prolonged period of time before the Fed hikes rates, which is what Bullard said. Stocks are higher too and oil is bid, which is another driver of a weaker dollar.”

Bullard’s Comments

After St. Louis Federal Reserve President James Bullard’s comments the euro broke the $1.45 barrier and some experts believe the euro will rise as high as $1.4800. Joseph Capurso of Commonwealth Bank said, “Expectations that the Federal Reserve will keep rates on hold for the foreseeable future, encouraged by Friday’s weak employment report have held the dollar down.” The European Central Bank meets this week and is widely expected to keep rates at record lows. US data to be released this week includes U.S. retail sales, industrial production and inflation data which could further test the dollar.

Commodity Demand Lifts Aussie, Loonie

Many currency experts believe that the Canadian and Australian dollars are on track for parity with the greenback due to rising commodity prices and increased demand. Accelerating U.S. growth is expected to increase demand for Canadian oil and natural gas and Chinese economic expansion will boost demand for Australian iron ore and coal. John Kyriakopoulos of National Australia Bank Ltd stated, “The global economy is going to strengthen, and the recovery is going to broaden out from what has so far been a China-, Asia-led global recovery.”