Dollar Soars To 14-Month Peak As ECB Announces Stimulus
Washington (Sept 4) The dollar surged to its highest in 14 months against the euro on Thursday after the European Central Bank announced unprecedented measures to spark the sluggish euro zone economy.
Aiming to avoid a dreaded deflationary cycle, the ECB announced two new programs under which it will buy asset-backed securities and covered bonds.
Also, the ECB unexpectedly offered three interest rate cuts, dropping its benchmark rate to 0.05% from 0.15%.
The ECB still has a few tools at its disposal should these measures fall flat, including large-scale purchases of government bonds ala the Federal Reserve's massive quantitative easing program.
The news from Europe overshadowed some lukewarm data on the US jobs market ahead of tomorrow's all-important official employment report for August.
The dollar rocketed to USD1.2940 versus the euro, gaining almost two cents in the course of a few hours. These are levels not seen since the summer of 2013.
Strong gains also took the dollar to its highest levels this year against the yen. Even though the Bank of Japan held steady on interest rates overnight, the dollar rose to Y105.30 by mid-day.
The dollar also extended its recent rally versus the sterling, touching USD1.6350 , its highest since January.
The Bank of England said it would keep its benchmark interest rate at an historically low level at 0.5%, where it has been since March 2009 .
Payroll processor ADP released a report on Thursday showing another notable increase in US private sector employment in the month of August, but the pace of job growth once again came in below economist estimates.
ADP said private sector employment rose by 204,000 jobs in August following a downwardly revised increase of 212,000 jobs in July.
And first-time claims for US unemployment benefits rose by slightly more than expected in the week ended August 30th , according to a report released by the Labor Department on Thursday.
The report said initial jobless claims edged up to 302,000, an increase of 4,000 from the previous week's unrevised level of 298,000. Jobless claims had been expected to tick up to 300,000.
Source: AllianceNews
