Nonfarm payrolls in the U.S. climbed by more than expected in December. Consumer spending such as food and gasoline helped drive the gain. However, other sources such as foreign investment, state and local governments, utility companies, and some asset managers were not as successful in pulling back on the cash flow. The result is that U.S. Dollar Gains as Nonfarm Payrolls Show double digit percentage points gain over last year.
Other analysts, including those from mutual fund companies, credit dealers, and investment bankers, see dollar gains as being supported by a number of factors. The most important is the continuation of rate cuts. Rates on U.S. Dollar Gains as Nonfarm Payrolls continues to weaken versus global counterparts. In addition, the U.S. Dollar Index continues its historic run versus all currencies. Economic data, including job numbers, consumer sentiment, and retail sales are also supporting the dollar. Lastly, wholesale inventories are dropping.
These dollar gains are viewed as a chance for investors to catch hold of the upswing and ride out what many analysts call a global economic slowdown. But the U.S. Dollar is far from being the only factor supporting these dollar gains. The weak dollar has combined with other factors, like weaker global currencies. The recent string of negative reports in U.S. Dollar Gains as Nonfarm Payrolls shows that the American economy is struggling. This has led to higher rates across the board and the U.S. Dollar Index. These moves and others like them are playing into the hands of those who benefit from current conditions.
While it is true that a combination of factors are helping support the U.S. Dollar, one can also argue that the strength of the dollar is directly correlated to higher non-Farm Payrolls. Payrolls help fuel the economy and that in turn, creates more jobs and consumers. A stronger economy means consumers have more spending power and the dollar keeps going up. It is the perfect storm of factors coming together to create the best environment for the dollar.
In order to understand why non-Farm Payrolls are associated with the U.S. Dollar, it is important to understand the differences between the two. The U.S. Dollar is backed up primarily by the strength of the American Economy. It is a stronger currency due to the country’s strong economy. On the other hand, foreign currencies are often driven by various political and economic factors.
In the past, the Swiss have used their strong Swiss Franc to take advantage of weaker economies in Europe and the U.S. to gain more trading partners. If the Swiss Government believed that the Swiss economy was weakening somewhat, they would export tons of Swiss Francs into Europe in hopes of creating more European Union jobs. In doing so, the Swiss would gain non Farm payrolls from the EU and Europe and would use the money to invest in the Swiss economy as well.
This same theory is used today by international investors. They invest in countries with weaker currencies in order to gain an advantage over the foreign currencies. In the past, they might have had this strategy but now they have additional tools at their disposal due to the weakness of the American Economy. The Swiss government understands that their currency is worth less than the dollar due to the foreign economic interest rate fluctuations. The Swiss government is currently trying to remedy this by increasing the Swiss Franc so that more investors can see it as a worthwhile investment due to the foreign currency fluctuations.
There are still many economic variables that will affect the value of the Swiss Franc and the Swiss National Bank. One of these factors is the Swiss economic interest rate. Another variable is the Swiss Franc’s ability to beat other currencies due to the increased trading partners that it has found in recent years. Regardless, of the factors that cause the Swiss Franc to be worth a lot more than it currently is, the Swiss government is doing everything possible in order to make the Swiss Franc a strong currency and one that will continue to