Thanks to data indicating a recovery in the U.S. economy, as well as efforts by the Japanese central bank to halt the excessive strengthening of the yen, the dollar sharply recovered in global currency markets at the end of last week.
The dollar index, which shows the value of the U.S. dollar against six major world currencies, rose by 1.09 percent last week to 75.78 points. Meanwhile, the price of the dollar against the Japanese currency jumped by 4.07 percent to 90.38 yen, after having fallen to just 84.83 yen a week earlier, the lowest level since 1995. The dollar also strengthened against the European currency last week, causing the euro exchange rate to drop by 0.79 percent to 1.4850 dollars. However, the euro strengthened against the Japanese currency, rising by 3.81 percent to 134.54 yen.
For most of the week, the dollar was under pressure, but its value surged sharply on Friday after it was announced that only 11,000 Americans were unemployed in November, the lowest number of job losses in a month since the beginning of the recession in December 2007. This and other data indicating an economic recovery fueled speculation that the U.S. Federal Reserve might raise key interest rates sooner than expected.
"The market is beginning to factor in that there could soon be a change in Fed policies, primarily regarding interest rates, and that has triggered the sharp rise of the dollar," says Paresh Upadhyaya, director at Putnam Investments. As a result, the dollar exchange rate jumped sharply on Friday from approximately 88 to over 90 yen. At the same time, it also strengthened significantly against the euro, causing the price of the European currency to plummet from 1.5090 to 1.4850 dollars.
