Egyptian pound falls to weakest level in six years
NEW YORK (MarketWatch) — The dollar recovered from an early bout of weakness to push higher Monday, extending last week’s gains against the euro and Japanese yen in the wake of a mixed U.S. jobs report.
Currency analysts noted rising U.S. Treasury yields working in favor of the greenback by making investing in the U.S. more attractive, which usually requires converting into dollars.
Both the dollar and Treasury yields rose on Friday after the government’s monthly payrolls report was deemed too distorted by snowy weather to put a damper on investors’ confidence in an improving labor market.
Nevertheless, the U.S. employment picture looks unlikely to improve to levels that will allow the Federal Reserve to begin lifting U.S. interest rates any time soon, while the European Central Bank appears likely to begin tightening by late this year, said Jane Foley, senior currency strategist at Rabobank.
Although German two-year paper lost some of its yield advantage over U.S. notes last week, yields are likely to remain biased in favor of the euro over the dollar in coming months, she said, while cautioning that the single currency’s projected advance on the dollar is unlikely to be smooth.
The euro slipped versus the dollar after Germany’s economics ministry said factory orders fell by a larger-than-expected 3.4% in December. See more on German factory orders.
Also, a Friday summit of European leaders yielded little agreement on increasing in the effective size of the European Financial Stability Facility. officials opted to wait to formulate a plan, leading traders to see them as procrastinating on resolving the euro zone’s sovereign-debt problems. See story on EU summit.
“The euro continued to weaken against its major counterparts on Monday as the EU failed to deliver a concrete solution to address the sovereign debt crisis,” said David Song, currency strategist at DailyFX. “The single-currency may continue to lose ground ahead of the next summit in March as European policy makers maintain a relaxed approach in balancing the risks for the region.”
U.K., Egypt
The British pound gave up earlier gains, with analysts focused on Thursday’s Bank of England meeting.
Sterling (GBPUSD 1.6125, +0.0027, +0.1677%) traded at $1.6103 from $1.6105 late Friday.
Most economists expect the central bank to keep its monetary policy unchanged. However, the money market sees a one-in-five chance of a rate hike, wrote strategists at Lloyds Bank.
Also, local trading in the Egyptian pound resumed as banks opened for the first time in a week due to protests to force President Hosni Mubarak to step down. The Egyptian currency fell to its weakest level against the dollar in six years.
The dollar (USDEGP 5.9090, +0.0540, +0.9223%) , rose 1.6% to buy 5.934 Egyptian pounds.
