Scottish Daily Mail

Dollar soaring on US jobs bonanza

- By Hugo Duncan

THE dollar soared to its highest level for nearly 12 years last night after a hiring spree by American companies set the scene for an interest rate rise this summer.

So-called non-farm payrolls – a crucial measure of employment in the US – increased by a ‘scorching’ 295,000 last month following a 239,000 rise in January.

The unemployme­nt rate in the world’s biggest economy fell to 5.5pc, its lowest level since May 2008 and below the 5.7pc seen in the UK and 11.2pc in the eurozone. Analysts said the ‘blockbusti­ng rate of job creation’ could force the Federal Reserve to raise rates as soon as June.

Sam Bullard, a senior economist at Wells Fargo Securities in the US, said ‘the economy is in a position for the Fed to begin normalisin­g’ interest rates having held them at between zero and 0.25pc since the depths of the Great Recession.

‘We think it is on the path to make a rate change in June,’ he said. The dollar soared against currencies around the world with the euro sinking below $1.09 to its lowest level since mid-2003. The greenback has r all i ed strongly since last summer on speculatio­n that the Fed, under chairman Janet Yellen, will start raising interest rates in the US as the economy recovers. The prospect of higher rates typically drives a currency higher as investors are attracted by hopes of better returns. At the same time, the threat of stagnation and deflation in the eurozone has weighed on the single currency. The European Central Bank this week said it will start printing money next week in a desperate attempt to breathe life into ailing economies in the 18-country eurozone.

The prospect of a flood of euros being created through so-called quantitati­ve easing has lowered the value of the single currency.

David Lamb, senior dealer at foreign exchange company Fexco, said the ECB’s announceme­nt ‘had already put the euro-dollar rate on the ropes’.

He added that the ‘scorching’ jobs figures from the US have left it ‘sprawling on the canvas’ with the Fed now expected to raise rates in the coming months.

Sterling has been caught between the strengthen­ing dollar and weakening euro. Speculatio­n that the Bank of England is also preparing to raise interest rates has bolstered the pound against the euro – and yesterday it rose above €1.39 to its highest level since late 2007 before easing.

But the Bank is not expected to act until well after the Fed – and possibly not until next year – weakening the pound against the dollar. Sterling dropped below $1.51 yesterday.

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