NEW YORK/LONDON (Businesshala) – The dollar rose to its highest level in nearly three years versus the Japanese yen on Monday as investors remained confident the US Federal Reserve would announce its massive bond-buying next month despite US payrolls data .
Traders shrugged off Friday’s mostly weak jobs report, which pushed higher US bond yields. The yen, which is known to be particularly sensitive to interest rate differentials, hit 113 yen per dollar in London trading for the first time since December 2018.
The Japanese currency was also hurt by a slight tilt towards riskier currencies, with the Australian dollar rising on the greenback, as oil prices hit multi-year highs on the back of the energy crisis, which was fueled by a pick-up in economic activity. Among the major economies were vulnerable.
Roberto Cobo Garcia, head of FX strategy at BBVA, said with Japanese government bond rates well anchored and the Bank of Japan keeping policy on ice, expectations of the Fed tapering announcement could soon push US Treasury yields higher to dollar- Should be pressed in favor of the yen range.
The main risk for the dollar-yen pair this week comes from US data, with both the consumer price index and retail sales on tap.
“Investors need to be a little cautious, because if inflation and consumer spending figures go down this week, it will be very difficult for the dollar to sustain its gains,” said Cathy Lien, managing director of BK Asset Management.
Overall, the dollar index, which measures the greenback against a basket of peers, was up 0.054% at 94.215, not far from its one-year high of 94.504 earlier this month.
US fixed income markets remain closed for the holiday on Monday, but the yield on the benchmark 10-year Treasury hit a four-month high of 1.617% on Friday, even as data showed the US economy slowed. September created the fewest jobs in nine months, missing forecasts.
However, the August figures were sharply revised down and the unemployment rate fell to an 18-month low, suggesting that fears of a labor shortage are justified, keeping inflation concerns alive and losing its momentum that began last year. Justified the Fed for reducing the emergency stimulus.
Australian dollar AUD = D3 It was the strongest since September 14, and was recently up 0.49% at $0.7346, helped by strong commodity prices and the partial reopening of Sydney, Australia’s largest city.
Concerns about inflation are not limited to the United States, with supply disruptions and rising commodity prices affecting many countries.
The British pound extended its recovery from a nine-month low late last month with a strength of $1.3627, on rising hopes the Bank of England could raise interest rates to curb inflation.
Canadian markets were off for a holiday, and the loonie was down 0.12% at C$1.24595, having previously hit a two-month high of C$1.24465 due to surprisingly strong Canadian payrolls data and higher oil prices.
In crypto, Bitcoin rose 4.1% to a new five-month high of $56,959, leading to gains over the weekend, while Ether also gained 4.72% to $3,583.
Graphic: World FX Rates Here