From Rae Wee
SINGAPORE (Reuters) – The dollar started the week strongly on Monday, leaving its peers near multi-year lows after a disastrous U.S. jobs report highlighted the world’s biggest economy outperforming the rest of the world.
The euro and New Zealand dollar were near their lowest levels in more than two years at $1.0242 and $0.5565 respectively in the early Asian session. Trading was thin as Japanese markets were closed for the holiday.
The Australian dollar struggled to break away from its weakest level in more than four years of $0.6139. It last traded 0.1% higher at $0.6153.
Data released Friday showed U.S. job growth unexpectedly accelerated in December, while the unemployment rate fell to 4.1% as the labor market ended the year on solid footing, prompting traders to sharply reduce rate cut bets Federal Reserve this year.
“This latest series of data underscores the fact that US economic exceptionalism remains a key market theme heading into 2025,” said Nick Rees, head of macro research at Monex Europe.
“The U.S. labor market has stabilized but is not continuing to ease, and that, combined with upside risks to inflation emanating from the incoming (Donald) Trump administration … should support an extended FOMC easing pause.”
Markets are now pricing in just 27 basis points worth of Fed rate cuts this year, down from roughly 50 basis points at the start of the year.
Adding to the expectation of a less aggressive easing cycle is the view that US President-elect Donald Trump’s plans for heavy import tariffs, tax cuts and immigration restrictions could boost inflation. He returns to the White House in a week.
Before that, US inflation data is due on Wednesday, where any positive surprise could threaten to close the door to full easing. A host of Fed officials are also scheduled to speak this week.
The US 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 extent of the yen’s decline was tempered by news that Bank of Japan policymakers may raise their inflation forecast at a policy meeting this month as a prelude to another rate hike.
Sterling was last up 0.07% at $1.2204, but did not stray too far from a 14-month low of $1.2239, also weighed down by worries at home over rising borrowing costs and growing uneasiness about Britain’s finances.
“All roads seem to lead to a lower GBP, with gains to be contained and sold quickly,” said Chris Weston, head of research at Pepperstone.
In China, it was little changed at 7.3605 to the dollar.
The People’s Bank of China suspended its purchases of government bonds on Friday, briefly lifting yields and fueling speculation that it is stepping up its defense of the Chinese currency.
