FOREX MARKET

Dollar drops as US jobless claims surge – CNBC


U.S. one-hundred dollar banknotes are arranged for a photograph in Hong Kong on April 15, 2019.

Paul Yeung | Bloomberg | Getty Images

The dollar dropped to a one-week low against a basket of currencies on Thursday after data showed an unprecedented surge in Americans filing for unemployment benefits, as businesses across the country shut down in an attempt to stem the spread of the coronavirus.

The number of Americans filing claims for unemployment benefits shot to record of more than 3 million last week.

The jobless blowout was announced shortly after Federal Reserve Chairman Jerome Powell said that the U.S. economy “may well be in recession” but progress in controlling the spread of the coronavirus will dictate when the economy can fully reopen. His remarks were an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

“The number has sent chills through the markets. If these numbers continue for three or four weeks, there will be demand for more fiscal support,” and even more monetary support from the Fed, said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

The dollar index fell 1.5% to 99.57, the lowest since March 18.

The euro gained to $1.0972, up 0.85% on the day and the highest since March 18. The greenback dipped 1.53% against the Japanese yen to 109.49 yen. The Australian dollar jumped 1.31% to $0.6036.

The U.S. Senate on Wednesday unanimously backed a $2 trillion bill aimed at helping unemployed workers and industries hurt by the coronavirus epidemic, as well as providing billions of dollars to buy urgently needed medical equipment.

The Federal Reserve last week launched new bond purchase and lending programs in an attempt to ease market logjams. It also committed to swapping dollars for foreign currencies with other major central banks after a desperate scramble for the currency last week sent the dollar to three year highs against the euro, 35-year highs against sterling and 17-year highs against the Australian dollar.

“Although the latest Fed measures have helped calm markets, as long as the Covid-19 crisis continues and the world economy is effectively in lockdown, we would expect markets to remain in turmoil,” foreign exchange analysts at Bank of America said in a report on Thursday.

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