Securities Market Line

     Tip:The yen and the dollar strengthened as stocks around the world declined before a report likely to show the U.S. unemployment rate rose to a 26-year high, spurring demand for the currencies as a refuge.

     Q:what is the opinion of China?

     A:Chinese Foreign Ministry official said he was “not aware” of a plan to discuss a new reserve currency at next week’s Group of Eight meeting. Sweden’s krona dropped after the Riksbank unexpectedly cut its main interest rate. The Swiss franc fell after a central bank board member said officials will act to prevent its gains. The euro slid before a meeting at which European Central Bank policy makers will probably leave the benchmark rate at a record low.

     “If there’s a disappointing number, the market will take fright and the dollar may get more support,” said Gavin Friend, a markets strategist at National Australia Bank in London. The China comments “offer support, the market has been on tenterhooks ahead of the G-8 meeting.”

     Q:Can you give us some examples of the currency?

     A:The dollar strengthened to $1.4097 per euro as of 9:54 a.m. in London, from $1.4142 in New York yesterday, when it weakened to $1.4201, the lowest level since June 5. The U.S. currency was at 96.69 yen from 96.65 yen. The yen appreciated to 136.30 per euro from 136.70 yesterday, when it reached a two-week low.

     Q:how does the currency influence the unemployment rate ?

     A:U.S. employers cut 365,000 jobs last month after reducing them by 345,000 in May, according to a Bloomberg News survey of economists before the Labor Department report. The unemployment rate climbed to 9.6 percent, a separate Bloomberg survey showed.

     Other information:

     The Dollar Index, which tracks the currency against those of six major U.S. trading partners including the euro, yen and pound, advanced 0.4 percent to 79.946.

     “We hope that as the main reserve currency the exchange rate of the U.S. dollar will be stable,” China’s Vice Foreign Minister He Yafei told reporters in Beijing. “This international financial crisis has fully exposed the weaknesses and loopholes in the international monetary system.”

     The dollar fell yesterday after Reuters reported that China had asked to debate proposals for a new global reserve currency at the G-8 summit in Italy. China’s central bank renewed its call for a new global currency in its 2008 review released last week, prompting speculation that the country will diversify its currency reserves. Read the rest of this entry »