SINGAPORE: The dollar began the week on a strong note on Monday, leaving its peers languishing near multi-year lows after a blowout U.S. jobs report that underlined the outperformance of the world’s largest economy versus the rest of the world.
The euro and the New Zealand dollar were pinned close to a more than two-year trough at $1.0242 and $0.5565, respectively, in the early Asian session. Trading was thinned with Japan markets closed for a holiday.
The Australian dollar struggled to break away from its weakest level in over four years of $0.6139. It last traded 0.1% higher at $0.6153.
Data on Friday showed U.S. job growth unexpectedly accelerated in December while the unemployment rate fell to 4.1% as the labour market ended the year on a solid footing, leaving traders heavily scaling back bets of Federal Reserve rate cuts this year.
Dollar gains extend ahead of US jobs reading
“This latest round of data underlines the fact that U.S. economic exceptionalism remains a key market theme to start 2025,” said Nick Rees, head of macro research at Monex Europe.
“The U.S. labour market has stabilised but is not continuing to unwind, and that combined with upside inflation risks stemming from the new (Donald) Trump administration … should support an extended pause to easing by the FOMC.”
Markets are now pricing in just 27 basis points worth of Fed rate cuts this year, down from roughly 50 bps at the start of the year.
Adding to expectations of a less aggressive easing cycle is the view that U.S. President-elect Donald Trump’s plans for hefty import tariffs, tax cuts and immigration restrictions could stoke inflation. He returns to the White House in a week.
Ahead of that, data on U.S. inflation is due on Wednesday, where any upside surprise could threaten to close the door on easing altogether. A slew of Fed officials are also due to speak this week.
The U.S. dollar was firm at 109.67 against a basket of currencies , hovering near its strongest since November 2022.
Against the dollar, the yen fell 0.12% to 157.92. The scale of the yen’s decline was mitigated by news that Bank of Japan policymakers could raise their inflation forecast at a policy meeting this month as a prelude to hiking rates again.
Sterling last rose 0.07% to $1.2204 but strayed not too far from a 14-month low of $1.2239, also pressured by concerns at home over rising borrowing costs and growing unease over Britain’s finances.
“It feels like all roads lead to a lower GBP, and rallies should be contained and swiftly sold,” said Chris Weston, head of research at Pepperstone.
In China, the offshore yuan was little changed at 7.3605 per dollar.
The People’s Bank of China suspended treasury bond purchases on Friday, briefly lifting yields and spurring speculation it is stepping up defence of the Chinese currency.
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