The US Dollar strengthened yesterday as robust employment data was released. The ADP National Employment Report showed that the private sector added 297,000 jobs in December, significantly more than the predicted 100,000. This was a big jump from the 97,000 jobs that were created in November and is the 11th straight month of expansion. The US Dollar increased against the Pound as a result and was up over 1.5% against the Japanese Yen and the Swiss Franc.
The Euro faired less well as Portugal was forced to pay a big interest rate premium to borrow from the markets. The Portuguese government had to pay substantially more than when it borrowed a similar amount in September last year. Investors continue to be concerned about Portugals future credit worthiness, as they look to raise EUR20bn this year. If Portugal’s borrowing costs continue to rise there could be fears that the country is heading for a bail out, similar to Greece and Ireland.
“Yields are tremendously high for a six-month bill, still showing that Portugal has no place to hide on the curve,” said David Schnautz, a strategist at Commerzbank AG in London. “The first real test will be the bond auction, which can happen as soon as next week.”
In more positive news the Pound continued to build on its gains from Tuesday, when positive manufacturing data from the last quarter of 2010 was released. This has indicated that the UK will be able to emerge from recession, despite public spending cuts and tax rises.
In other news a slight drop in the value of gold has put further pressure on the Australian Dollar. Australia is one of the world biggest gold exporters. This has coupled with the disastrous floods in the country’s North West to weigh on the nations currency.
Concerns about the impact of the Australian floods are likely to continue to pressure the currency, especially against other commodity-linked currencies such as the Canadian dollar, said David Forrester, FX strategist at Barclays Capital in Singapore.