USD Dips Amid Surge in Job Openings
Updated
The US dollar faced a decline against major currencies on Friday as investors assessed the recent US job report. While the data indicated widespread hiring in September, wage growth appeared to be slowing down.
The dollar index, measuring its strength against a basket of six key rivals, dropped by 0.31% to 106.03. Initially, the index had surged to 106.98 in early trading after nonfarm payrolls data revealed a gain of 336,000 jobs in the previous month. Revised figures for August also showed additional jobs, with 227,000 new positions instead of the previously reported 187,000. Economists surveyed by Reuters had predicted a September increase of 170,000 jobs.
"The data this morning has pushed expectations for the first rate cut deeper into late 2024, but it has not convinced market participants of another rate hike this year. Short-term rates, which play a leading role in driving forex volatility, remain relatively stable," said Karl Schamotta, Market Strategist at Corpay in Toronto.
According to CME's FedWatch tool, after the labor report, US futures contracts showed a 42% chance of a rate hike by the end of the year, up from about 33% on Thursday.
The recent strength of the US dollar was bolstered by a rapid sell-off in US government bonds, driving yields to multi-year highs. While the 10-year Treasury yield hit 4.887% and the 30-year yield reached 5.053%, both the highest levels since 2007, the 2-year yield surged to 5.151%, remaining below the 5.202% reached on September 21.
The monthly wage increase remained moderate, with average hourly earnings rising by 0.2% after a similar increase in August. Over the 12 months ending in September, wages increased by 4.2% following a 4.3% rise in August.
"When we look at today's report, hourly earnings may be weak enough for the Fed not to need to raise rates, but we will see what happens with inflation; I think that is still under consideration," said Tony Welch, Investment Director at SignatureFD in Atlanta.
For the week, the dollar index edged down by 0.1%, ending an 11-week streak of gains, which had boosted the index by approximately 6%.
"This is a minor profit-taking activity," stated Helen Given, Forex Trader at Monex USA, regarding the dollar's Friday reversal.
Attention now shifts to next week's US inflation data, which could provide clues for future Fed actions. Schamotta of Corpay emphasized, "If US consumer price data next week drives yields higher, we will see safe-haven flows begin to support the greenback."
Against the yen, the dollar rose by 0.54% to 149.31 yen, hovering near the closely watched 150 mark. Traders speculated about potential interventions by Japanese officials to counter the yen's prolonged depreciation.
The British pound closed the week on a positive note, rising by 0.43% to $1.22445, reinforcing optimism about a larger recovery for the British currency.
The dollar index, measuring its strength against a basket of six key rivals, dropped by 0.31% to 106.03. Initially, the index had surged to 106.98 in early trading after nonfarm payrolls data revealed a gain of 336,000 jobs in the previous month. Revised figures for August also showed additional jobs, with 227,000 new positions instead of the previously reported 187,000. Economists surveyed by Reuters had predicted a September increase of 170,000 jobs.
"The data this morning has pushed expectations for the first rate cut deeper into late 2024, but it has not convinced market participants of another rate hike this year. Short-term rates, which play a leading role in driving forex volatility, remain relatively stable," said Karl Schamotta, Market Strategist at Corpay in Toronto.
According to CME's FedWatch tool, after the labor report, US futures contracts showed a 42% chance of a rate hike by the end of the year, up from about 33% on Thursday.
The recent strength of the US dollar was bolstered by a rapid sell-off in US government bonds, driving yields to multi-year highs. While the 10-year Treasury yield hit 4.887% and the 30-year yield reached 5.053%, both the highest levels since 2007, the 2-year yield surged to 5.151%, remaining below the 5.202% reached on September 21.
The monthly wage increase remained moderate, with average hourly earnings rising by 0.2% after a similar increase in August. Over the 12 months ending in September, wages increased by 4.2% following a 4.3% rise in August.
"When we look at today's report, hourly earnings may be weak enough for the Fed not to need to raise rates, but we will see what happens with inflation; I think that is still under consideration," said Tony Welch, Investment Director at SignatureFD in Atlanta.
For the week, the dollar index edged down by 0.1%, ending an 11-week streak of gains, which had boosted the index by approximately 6%.
"This is a minor profit-taking activity," stated Helen Given, Forex Trader at Monex USA, regarding the dollar's Friday reversal.
Attention now shifts to next week's US inflation data, which could provide clues for future Fed actions. Schamotta of Corpay emphasized, "If US consumer price data next week drives yields higher, we will see safe-haven flows begin to support the greenback."
Against the yen, the dollar rose by 0.54% to 149.31 yen, hovering near the closely watched 150 mark. Traders speculated about potential interventions by Japanese officials to counter the yen's prolonged depreciation.
The British pound closed the week on a positive note, rising by 0.43% to $1.22445, reinforcing optimism about a larger recovery for the British currency.
Note
The market is still progressing well.
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