Dollar drifts 1-week High, Keeps Firm on U.S. Jobs Data

The dollar drifted close a one-week high versus the yen on Monday, buoyed by stronger-than-anticipated U.S. jobs and factory data, even though the Federal Reserve’s wary policy viewpoint and thinned holiday trade in Asia are about to cap further gains.

Dollar with dollars background.

Data showed that the U.S. economy made 304,000 occupations in January, the highest in 11 months, and above street approximations.

The dollar was slightly higher against the yen at 109.53, following its biggest percentage gain in nearly a month in Friday’s U.S. session.

“The non-farm payroll was a strong number and is supporting the dollar. A dovish Fed had hit the dollar/yen but rising stocks and solid U.S. data have led to this bounce back,” said Nick Twidale, chief operating officer at Rakuten Securities.

The solid jobs report also lessened worries of the stoppage in the U.S. economy, leading traders to trim anticipation the Fed would need to cut interest rates to help the economy later this year.

The benchmark 10-year U.S. Treasury yield was 2.69 percent, recovering from a four-week low of 2.619 percent earlier a week ago. Growing U.S. yields are most likely to support the dollar in the close term.

In wider moves, currency markets remained in tight ranges in early Asian trade, with euro trading flat at $1.1455.

China’s financial markets are closed entire week for the Lunar New Year holiday. Other Asian markets are also closed for parts of the week, keeping broader market activity subdued.

The Australian dollar was lower by 0.2 percent at $0.7234 however the kiwi was a bit higher at &0.6901. The Aussie was hit after the release of weaker-than-expected building approvals data.

Traders are now concentrating on the Reserve Bank of Australia’s financial policy meeting on Tuesday, where it is broadly anticipated to retain the currency rate stable. Weakening financial data has led specialists to feel the RBA would probably keep monetary policy accommodative.

Futures markets imply around a 50-50 chance the RBA will cut the 1.5 percent cash rate by the end of the year, despite its repeated assertions that the next move would be up.

“Market expectations have emerged for a rate cut as opposed to the RBA’s view that the next move in rates is an increase. The RBA will also need to temper its optimistic economic outlook” in Tuesday’s monetary policy statement, said Philip Wee, currency strategist at DBS, in a note.

The dollar index, a gauge of its value versus six major peers, was steady at 95.58.

Regardless of the strong labor market, the U.S. central bank is extensively anticipated to retain rates this year thanks to heightened concerns over worldwide development, particularly in China. Growth in the euro part has also been weaker-than-expected with Europe’s main financial engines, France and Germany, slowing down.

Increasing U.S. interest rates were the main driver of the dollar’s outperformance a year ago. Nonetheless, most analysts do not see much benefit in the dollar this year as U.S. borrowing costs are broadly expected to stay stable.

Elsewhere, sterling was flat at $1.3083 in early Asian trade. Traders anticipate the British pound to stay volatile as Brexit uncertainty remains high. The Bank of England is scheduled to meet later this week and broadly expected to retain interest rates stable.

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