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US$ falls amid expected surge in US jobless claims

London

THE dollar fell further on Thursday ahead of key US data that is expected to show a surge in unemployment benefit claims as companies lay off workers due to the rapid spread of the novel coronavirus.

Investors welcomed the passage of a US$2 trillion US stimulus package to offset the economic impact of the Covid-19 pandemic, but there are already indications that some American states will need more money for medical supplies.

Economists polled by Reuters expect US jobless claims to have risen by 1 million in the week to March 21 - an indicator of much the spread of the virus has affected the world's largest economy.

If the number meets market expectations, it would be well above the previous peak seen during the 2008 global financial crisis. The record before that was just a little under 700,000 in 1982, when the United States was going through a recession.

Many analysts, however, have put the number between one and four million. "The wide range of estimates, from around one million to four million, show that we lack historical references to really understand the impact of this unique and probably massive crisis hitting the economy," said Christopher Dembik, head of macro analysis at Saxo Bank.

The dollar shed 0.8 per cent of its value against the euro to trade at US$1.0979, a one-week low. It also lost 1.4 per cent of its value versus the safe-haven Japanese yen and was last changing hands at 109.60 yen, a six-day low.

Analysts at MUFG said the common currency was also boosted by the fact that nine European Union (EU) countries including France, Italy and Spain have called for issuing joint bonds to help revive the euro zone economy from a deep slump caused by the novel coronavirus.

However, Germany and the Netherlands will lead opposition to issuing the mutualised debt when the EU's national leaders discuss emergency assistance on Thursday.

The US$2 trillion package includes one-off payments to individuals, increased benefits for the unemployed, and aid to companies, including loans and debt relief for small businesses, plus assistance to states and local governments.

The United States also opened the taps for short-term dollar funding as the Federal Reserve swapped dollars for foreign currencies with other major central banks. This has helped to ease the cost of swapping three-month yen into dollars. REUTERS