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The US dollar currency halted its rise since Friday after claiming a rise in US unemployment data that implied a possible easing of conditions in the labor market and dampened expectations of further aggressive interest rate hikes from the Fed.
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In Asia, the move was subdued as markets awaited the Bank of Japan’s monetary policy decision at the end of a policy meeting by Haruhiko Kuroda, the last head of the BoJ before he stepped down in April. The Japanese yen was steady in early Asian trade, with data showing it was 0.2% higher at 135.89 per dollar, retreating from a near three-month low hit earlier in the week. The BoJ is widely expected to keep interest rates ultra-low on Friday and refrain from major changes to its controversial yield control policy, leaving options open ahead of a leadership change in April, said Chris Weston, head of research at Pepperstone. While that should be a non-event in theory, there is a non-zero chance that Kuroda will come out with a bang and change yield curve control, he said. The Japanese yen has come under pressure again in recent weeks as the BoJ has remained dovish while U.S. interest rate expectations have risen. That has seen the yen weaken from its peak in January, reversing a rally that followed the BoJ’s surprise adjustment to yield curve control in December. Elsewhere, the US dollar dipped slightly on Friday. EUR/USD rose 0.13% to $1.0595, while the pound sterling (GBP/USD) also gained 0.05% to $1.1932, and both were well off multi-month lows hit on Wednesday. NZD/USD rose 0.07% to $0.6106, while AUS/USD dipped 0.13% to $0.6582. Data released on Thursday showed that the number of Americans filing new claims for unemployment benefits rose by the most in five months, although the underlying trend is consistent with a tightening labor market. Still, the jump in jobless claims was enough to cause traders to unwind some bets that US interest rates would rise more than previously expected. Futures pricing now implies a roughly 54% chance that the Fed will raise rates by 50 basis points this month, compared with 70% before the data. The Fed funds rate is projected to peak just below 5.5% in July. The U.S. dollar index (DXY) against a basket of currencies fell 0.12% to 105.12, but remains on track for a weekly gain of nearly 0.6%. It surged earlier this week after Jerome Powell struck a hawkish tone from market expectations in his semi-annual testimony before the Banking Committee. The focus now is on Friday’s closely watched nonfarm payrolls report, the next major data point that could provide clues on the Fed’s next move on monetary policy.
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According to a Reuters survey, nonfarm payrolls likely rose by 205,000 in February after rising by 517,000 in January. Kiwibank chief economist Jarrod Kerr said the payrolls report had surprised them, and Kerr thought about 10 straight months now was a sign of real strength for the U.S. economy. He added that it was a little frustrating for the Fed. They tightened a lot and hoped that would have an impact. But they have bounced back in many of the activity indicators over the last few months. So it doesn't look like the job is done.
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