Stocks’ Rally Troubles Dollar, Employment Improves in US

The US dollar weakened today as the rally of stocks reduced demand for safer currencies. Forex traders remained wary, though, as there are still many signs of possible double-dip recession.

The speculation that the European Central Bank is able to support the troubled economy of the European Union, especially the economies of the most-indebted nations, helped to revive risk appetite on markets and boosted equities. The Standard & Poor’s 500 Index rose 1.2 percent. The ECB will hold the policy meeting tomorrow that may have a strong impact on the outlook for the future of the EU economy.

The employment report from Automatic Data Processing Inc. showed an improvement of the US labor market as the American employers added 91,000 jobs in September, more than 76,000 predicted by forecaster. The positive ADP report supported the good outlook for the non-farm payrolls later this week. The payrolls will be released on October 7 and analysts expect them to show a 51,000 jobs growth.

The Dollar Index dropped 0.2 percent from 79.063 to 78.876 by 14:17 in New York. The losses of the greenback weren’t very big, at least for now, as there are plenty of reasons for investors to worry about the world economy and they are still afraid to risk.

EUR/USD traded slightly below the opening rate of 1.3354 at 1.3347 today as of 19:04 GMT, rebounding from the daily minimum of 1.3259. GBP/USD fell from 1.5486 to 1.5464, yet the currency pair reduced its losses after falling to 1.5393. USD/JPY retreated from 76.78 to 76.71, following the advance to the high of 77.06.

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