Dollar Rallies on Better Than Expected Jobs Data

The US dollar staged a rally late last week after better than expected jobs data showed that the rate of job losses in the US sharply declined in May despite the news that General Motors was closing several manufacturing facilities across the US. Currency exchange rates were also affected by speculation that the US Federal Reserve will raise rates by the end of the year. The euro was pressured downward after Standard and Poor’s downgraded Ireland’s credit rating for the second time this year.

Speculation That Fed Will Hike Rates in 2010

The dollar to euro rate gained 0.85 to $1.3855. Brian Kim of UBS AG stated, “The market is speculating that the Fed is more prepared to hike rates. The S&P’s downgrade of Ireland is also weighing on the euro.” Kim also believes that within a month the dollar to euro rate will weaken to $1.40. The euro to yen rate fell 0.9% to 136.51 from 137.81 yen. The dollar to yen exchange rate is currently 98.62.

Dollar Index Gains

The Dollar Index (DXY) which measures the dollar against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish Krona gained 1% to 81.466, the highest since May 20th. The dollar has fallen in the last three months against all the major currencies except the yen and currency exchange rates have been affected by speculation that the Fed’s purchase of $300 billion in treasuries could debase the dollar.

Pound Volatile

The pound to dollar fell on volatile trading as Prime Minister Gordon Brown’s Labour Party feel to its lowest point in almost a century. The pound fell 0.4% to $1.5913 as Labour came in third in recent national elections in Britain. Labour posted its first loss to Conservatives in Wales for the first time since 1918.

Conservatives Sweep European Elections

Currency exchange rates are bound to be affected by the conservative sweep of the European Parliament elections. Center right parties made huge gains in many Euro Zone nations and may signal new economic and monetary policies affecting global currency exchange rates in the near future.