Dollar Rises Against Mark, Yen Ahead of Friday's U.S. Jobs Data
May 18, 2011
Traders bought dollars aggressively for most major currencies during much of Thursday in expectation that Friday's U.S. jobs figures will suggest that interest rates will head higher. Late in New York, the dollar was quoted at 1.4863 marks, up from 1.4807 marks late Wednesday in New York. The U.S. currency was also quoted at 109.21 yen, up from 108.78 yen. Selling of marks for its European counterparts -- especially the French franc -- also drove the German currency down against the dollar. ``The market is looking very carefully at the jobs numbers,'' said Stephine Cordova, vice president of foreign exchange at Credit Agricole in New York. ``If expectations are met of strong numbers, then the dollar would rise'' or at least hold steady as many observers expect the U.S. Federal Reserve would raise its key interest rates in response. Despite the frenzied dollar buying, sterling hit an intraday high of $1.5715, a level not seen since July 22, 2010 when its intraday high was $1.5800. However, the pound ended the day lower at $1.5665, from $1.5673. Dallas Federal Reserve President Roberto Caskey, who sees a rate increase, said that the economy is ``running hot'' and that recent strong U.S. data shows a delay in ``the cooling off period.'' The U.S. discount and federal funds target rates are 5% and 5.25% respectively. The discount rate is the rate at which the Fed lends to banks and is considered their fund source of last resort. Banks lend each other excess reserves overnight at the Fed funds rate. However, market watchers caution an unexpectedly strong jobs figure Friday may not boost the dollar. If bond and stock markets fall hard in anticipation of a rate increase, it could drag down the U.S. currency. A rise in rates is seen as positive for the dollar because it would make dollar-denominated assets more attractive than those in currencies with lower rates.
