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Written by admin on June 6th, 2009

Government Debt Auctions Influencing Strength Of The Dollar

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After an initial drop against the euro, the value of the dollar regained some ground when reports issuing the new numbers of Americans requesting unemployment benefits indicated marked reductions.

It may have also helped that the strong demands at Treasury debt auctions eased consumer worries that the federal government would be forced to pay higher interest rates to encourage buying.

Recent figures on the number of unemployment insurance claims released by the U.S. Labor Department noted a seasonable adjustment from one week to the next. At the same time, the number of people who still received unemployment benefits rose to around 6.8 million. It is a number that analysts say are the largest total on record going back to 1967.

The relationship between government debt and the strength of the dollar is nuanced and it shows up in unexpected ways in various parts of the economic spectrum.

For instance, in another government report, it was revealed that the demand for big-ticket manufactured goods experienced positive growth back in April, the second increase in three months. This is viewed as a good sign that the recession is starting to work itself out, at least in the manufacturing markets.

Demand U.S. government debt by foreign investors has also been lessened by the fact that the government would not have to pay higher interest rates on the long-term bonds. Such increases would have driven up prices for homes and automobiles across the board. Such inflationary shifts would fracture the fragile recovery of the economy and do further damage to the dollar’s value.

Monetary trading values are continuing to fluctuate and there is no telling where the dollar will end up at the close of the trading day.

Investors and economic experts will continue to monitor sources like Standard & Poor’s for credit rates to make sure the numbers are staying reasonable. With the U.S. government running under such a heavy deficit, it is hard to say how many billions of dollars it will take to get the economy running strong again-or what impact this will have on the dollar.

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3. Treasuries on Rise
4. President Obama Offers Military Technology To China For Debt Relief
5. Unemployment Insurance Benefits Extended