Dollar's Resilience to Continue

Like a beach ball pushed underwater only to shoot higher when released, the dollar surged despite the disappointing jobs data Friday.

As is its wont, the consensus continued to anticipate stronger job growth than the U.S. economy is generating. In fairness, the dollar did initially sell off amid the disappointment in the news that U.S. economy added 146,000 jobs, with recent months' job growth revised lower, rather than the 200,000 the consensus called for. Yet within minutes, the dollar turned higher and didn't look back.

The ostensible spur for the dollar's reversal was comments by Federal Reserve Chairman Alan Greenspan. He waxed eloquent about how the large U.S. current account imbalance may be on the verge of correcting, with the help of tighter U.S. fiscal policy, the weaker dollar, and the likelihood that foreign producers will begin resisting further pressure on their profit margins by raising the prices of their exports to the U.S.

This represents a dramatic shift from the assessment the chairman offered in the middle of last November. Then his concern that the foreign appetite for U.S. securities was not insatiable helped trigger a dramatic slide in the dollar's value and seemed to echo the concerns of many observers.

While this may help explain Friday's price action, it may be more useful to place Friday's developments in a larger context.

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Marc Chandler has been covering the global capital markets in one fashion of another for nearly 20 years. He has worked at economic consulting firms and at global investment banks. Most recently, Marc was the chief currency strategist for HSBC Bank USA. He is a prolific writer and speaker and appears regularly on CNBC. In addition to being quoted in the financial press, Chandler is often a guest writer for the Financial Times. He also teaches at New York University, where he is an associate professor in the School of Continuing and Professional Studies. In September 2004, Marc started a financial consulting firm, Terra K.While he cannot provide investment advice or recommendations, he invites you to send comments on his column to [e-mail].