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What's going on with the dollar?

by , 07 October 2015

The US Federal Reserve hasn't raised interest rates since June 2006. That's nine and a half years ago.

Last month, chairwoman of the Fed, Janet Yellen, announced the Federal Open Market Committee's decision to delay a rate hike once again due to worries about the global economic recovery.

So what does a weaker dollar mean?

Let's take a closer look…

The dollar fell as US jobs data came out poorer than hoped

On Friday, the US released its non-farm payrolls data for September. The market was hoping for an addition of 203,000 jobs, but the actual figure fell short at 142,000.

And to add to the bad news, the figure for August was revised downwards from 173,000 to 136,000. The number out of work remained at 5.1%.

It was a poor report, showing that for the first time in three years, payrolls haven’t grown by more than 150,000 for two months on the trot, John Stepek in Money Morning UK explains.

The result of Friday’s report is those expecting a rate hike in the US before the end of the year has fallen sharply. The vast majority believe it will be next year before this happens.

What a weaker dollar means

Stock markets took the news of interest rates staying at record lows in the US as good news, rallying higher. A weaker dollar also lead to a jump higher in commodities, like gold and oil.

The only thing to lose out was the US dollar.

Emerging markets benefitted. Our rand continues to feel the benefits of a weaker dollar after hitting a two week high today.

Commodity-driven markets and emerging markets could certainly be on course for a bit of reprieve, but it may be slow in commodities where supply outweighs demand,

So there you have it. What’s going on with the dollar.

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What's going on with the dollar?
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