Investors still digest USD’s performance after NFP report

The US dollar has significantly surged during the course of the trading session on Monday to start the week and slice through the ¥112.50 level.

The dollar ticked up to a 2-1/2-year high versus the yen on Monday after a soft U.S. payrolls figure did little to alter market expectations that the U.S. Federal Reserve could announce tapering its massive bond-buying in November.

The impact of the U.S. payrolls data so far has been soft but details show strength as Fed’s tapering is expected to be on track.

The British Pound as well as the Canadian dollar supported on rate hike expectations. Data for August was revised up sharply while the jobless rate dropped to an 18-month low of 4.8% due to people leaving the labour force. Average hourly earnings also increased 0.6% from 0.4% in August.

Labour shortage firmly remains in place, keeping concerns about inflation breathing and giving the Federal Reserve justification to go ahead with reducing the applicable stimulus for pandemic relief.

U.S. bond yields rose on the data, with the benchmark 10-year Treasuries yield hitting a four-month high of 1.617%, boosting the dollar’s yield attraction.

The yen, known to be most sensitive to yield differentials, reacted by slipping to as low as 112.32 yen per dollar, a level last recorded in April 2019.

The dollar/yen is now at the top end of its trading range, its 2019 peak of 112.40, so investors expect heavy selling for now. The dollar is expected to continue rising to 113 or 114 handle quite easily.


The euro was soft at $1.1575, hovering above its Wednesday’s low of $1.1529, its weakest level since July last year.
The dollar’s index stood at 94.09, not far from its one-year high of 94.504 touched earlier this month.
The U.S. currency could gain further if U.S. consumer price data due next Wednesday shows an upswing in inflation and boost expectations of an earlier rate hike next year after tapering.
With supply disruptions and rising commodity prices impacting many other countries, concerns about inflation is not limited to the United States.

The British pound held firmer at $1.3623, extending recovery from a nine-month low set late last month, on growing expectations that the Bank of England could raise interest rates to curb soaring inflation.

The Canadian dollar changed hands at C$1.2473 per U.S. dollar, having hit a two-month high of C$1.24525 on Friday thanks to surprisingly strong Canadian payrolls data and lofty oil prices.

Elsewhere, the offshore Chinese yuan changed hands at 6.4438 per dollar, its Oct. 1 high of 6.4286.

In cryptos, bitcoin was firm at $54,782 having hit a five-month high of $56,561 on Sunday while ether is softer at $3,456.