Treasuries at Seven Month High

Smaller than expected US job losses helped the US dollar to recover some of the losses of the past two weeks. Also helping the dollar was the news that US treasuries rose to seven month highs spurring demand for the greenback. Smaller than expected job losses prompted investors to speculate that the Fed may raise rates in 2010 raising treasury yields.

Dollar’s Recent Fall Was Premature

Dollar exchange rates improved as forex investors noted the improving US economy. Lee Hardman of Bank of Tokyo-Mitsubishi UFJ stated, “If data shows the U.S. economy outperforming others, there may be potential for the dollar to strengthen further in the short term.” Many traders and investors believe that the dollar’s recent falls were premature. The DXY which measures the dollar against a basket of six major currencies rose above 81 affecting the dollar’s exchange rates. The DXY rose 1.6% late last week its highest since December.

Gordon Brown Faces Political Difficulties

The euro to dollar exchange rate fell 0.7% to $1.3870 and the euro to yen rate fell 0.7% to 136.81 yen. Political upsets in the UK affected the pound to dollar rate which 0.8% to $1.5837. British Prime Minister Gordon Brown is facing serious political challenges and support for his Labour Party is at its lowest level in nearly a century.

US Government to Auction 10 and 30 Year Treasuries This Week

Currency exchange rates will be affected by this week’s auction by the US government of 10 and 30 year treasuries. In Asia 2 and 10 year treasury yields hit their highest level since November 2008. Some investors worried that the rise in US treasuries could hurt US stocks triggering a rise in risk aversion prompting a buyback of the dollar.

Global currency exchange rates have been affected by the dollar’s comeback. It would appear that for once the dollar’s rise was not prompted by risk aversion.