Dollar Rally Limited as Market Questions Trade Balance Number (page 2 of 2)

The London Stock Exchange announced that they are also entertaining bidders for more stakes in the exchange. Meanwhile labor market data released this morning was mixed. The number of claims increased from an upwardly revised 19.9k to 12.6k, bringing the unemployment rate up from 5.0 percent to 5.1 percent. However, average earnings saw a huge jump from 3.6 percent to 4.2 percent, indicating that even though less people have jobs, the ones that do have jobs are earning more. This should keep expectations relatively steady for the Bank of England to continue to maintain their neutral monetary policy.

Japanese Yen

The Japanese Yen continued to sell off against the other major currencies despite the fact that there were rumors that the Bank of Japan could end their zero interest rate policy as early as the third quarter, which coincides with the speculation from the recent Medley report. However if you recall, it was only yesterday after their monetary policy meeting that the Bank of Japan let the market know that they are in no rush to bring rates above zero.

The fact that ten year yields rose above 4.98 percent is keeping the US dollar bid, but the crosses also remain very strong after recent breakouts to the upside. Everyone trading the yen is looking forward to Chinese President Hu's visit to the US next week. With the huge trade surplus reported yesterday, China will probably come under more pressure to revalue the Yuan. Former Fed Chairman Greenspan chimed in today by saying that "high growth economies should let their currency appreciate."

China on the other hand, seems to move only by their own timetable and for the most part is still opting to do things gradually. They have come to the realization that dumping dollars and US Treasuries is not the solution. Instead, they are limiting further purchases and are spending that extra cash on buying tangibles such as oil and gold.