After strong U.S. jobs data, Asian traders priced in longer-term higher interest rates, strengthening the currency.
After Chinese services activity rose, the Australian dollar recovered. The yuan gained too.
Crude oil price increases supported the Canadian currency.
After Friday’s payroll report revealed 339,000 public and private sector jobs added in May, exceeding the 190,000 anticipated by Reuters economists, Treasury yields rose, supporting the currency.
As Tokyo 10-year U.S. Treasury yields rose more than three basis points to 3.727%, the dollar rose 0.11% to 140.135 yen. Friday’s dollar-yen rise was 0.84%. The euro fell 0.04% to $1.0702.
While headline U.S. jobs growth was much stronger than expected in May, wage pressures eased, and the unemployment rate climbed off a 53-year low, giving the Federal Reserve room to pause their rate hiking campaign at the June 13-14 meeting, as some officials had suggested last week.
However, those bets moved to July, and traders eased off on rate cuts later in the year.
CME Group’s FedWatch tool shows interest rate traders are betting 1-in-4 on a raise next week, down from 2-in-3 last week. But, markets predicted a 70% likelihood of rates rising at least a quarter point in July.
“It’s very data-driven, and given that wages are moderating, it would point to a potential pause – but I don’t believe they’re done,” said Tokyo State Street branch manager Bart Wakabayashi. “The dollar overall is going to remain well supported.”
Wakabayashi predicts the dollar to reach 142.50 yen and break through to 145.
“People will buy dollar-yen on dips,” he remarked.
China’s epidemic recovery helped the Aussie recover from early losses of 0.25% to $0.6605. In addition, the private-sector Caixin/S&P Global services purchasing managers’ index (PMI) rose to 57.1 in May from 56.4 in April, contrasting with last week’s official PMI, which indicated weaker growth.
The yuan rebounded. After rising 0.15%, the dollar fell 0.03% to 7.1074 yuan offshore. Thursday’s 7.1404 was a six-month high.
After Saudi Arabia announced its biggest production cut in years, petroleum prices rose more than 1%, strengthening the Canadian currency. The dollar fell 0.06% to C$1.34265, approaching Friday’s two-week low of C$1.3408.
