Despite lower U.S. payroll numbers, the dollar surged to its best level in nearly three years against the yen on Monday. Investors remained hopeful that the Federal Reserve will announce a tapering of its mammoth bond-buying program next month.
The release of Friday’s jobs reports pushed up U.S. bond yields. This caused the yen, which is notorious for being particularly sensitive to yield differentials, to fall to as low as 112.84 yen per dollar. A minor shift towards riskier currencies also harmed the Japanese yen. The sterling and the Australian dollar gained ground on the greenback. This left the dollar index a tad down at 94.137 but close to a one-year high 94.504 reached earlier this month.
The Impacts on Yen
According to Joel Kruger, the currency strategist, the continued crude oil rally also weighed down the yen, given Japan’s status as a net oil importer. He added that the currency had been hampered by monetary policy divergence between the Bank of Japan and its peers.
The yen has received broad selling pressure for the third day in a row,” Kruger added. Due to a feedback loop with the Japanese stock increase, PM Kishida’s capital gains tax comment has lifted a broader mood. The Nikkei 225 index in Japan climbed for the third consecutive day. It extended its rebound from a six-week low set last week. A substantial drop in the yen encouraged exporters, and a reduction in COVID-19 infections buoyed economic revival optimism.
To address income disparity in Japan, Japanese Prime Minister Fumio Kishida indicated on Monday that he would prioritize raising wages through tax incentives over imposing higher capital gains and profits levies. The currency and fixed income markets in the United States are closed on Monday for a holiday. Still, the benchmark 10-year Treasury yield hit a four-month high of 1.617 percent on Friday. Notwithstanding the data showed the United States created the fewest jobs in nine months in September, significantly underperforming economists’ forecasts.
However, numbers for August substantially rose. The unemployment rate fell to an 18-month low. This implies that fears of a labor shortage remain legitimate. Hence keeping inflation fears alive and justifying the Federal Reserve to withdraw the emergency stimulus launched last year.
The offshore yuan was recently trading at 6.4370 per dollar. It neared the top of its recent range but falling short of its September high of 6.422. The Australian currency strengthened somewhat, approaching its highest level in a month. It received aid from robust commodity prices and the partial reopening of Sydney, Australia’s largest city.
Supply interruptions and rising commodity prices affect many countries. Hence, inflationary concerns are not restricted to the United States. The British pound remained solid at $1.3634. It extended its rebound from a nine-month low reached late last month, increasing optimism that the Bank of England will boost interest rates to combat rising inflation.
The Canadian currency was trading at C$1.2450 per U.S. dollar, reaching a two-month high of C$1.24465 on the back of surprise good Canadian payroll statistics and sky-high oil prices.
On the other hand, the euro remained flat at 1.1575, only a touch higher than its Wednesday low of 1.1529, its lowest level since July of last year.
Bitcoin soared 3.5 percent to a fresh five-month high of $57,092, extending gains seen over the weekend, while ether rose 5 percent to $3,620.