FOREX-Dollar heads for strongest week since July, yen on back foot

Credit: REUTERS/Lee Jae Won

By Ankur Banerjee

SINGAPORE, Jan 5 (Reuters) - The dollar was steady on Friday, heading for its strongest weekly performance since July on scaled back expectations of steep and early interest rate cuts this year ahead of closely watched U.S. payrolls data later in the day.

The U.S. currency's strong start has cast a shadow on the Japanese yen JPY=EBS, with the Asian currency down 2.5% against the dollar in the first week of the year, its weakest weekly performance since August 2022.

The dollar's rebound will be tested by the nonfarm payrolls report due later in the session. Economists polled by Reuters forecast that 170,000 jobs were created in December, fewer than the 199,000 in November.

Fed officials in December predicted 75 bps of rate cuts in 2024, driving money-market bets for around double that amount, with market optimism spurring a year-end blistering rally in stocks and bonds.

"But we'll see, because tonight's payroll data will be a key data to watch."

U.S. private employers hired more workers than expected in December, data showed on Thursday, pointing to persistent strength in the labour market that should continue to sustain the economy.

That helped the dollar shrug off weakness and against a basket of currencies, the U.S. currency =USD was last at 102.51 on Friday. The dollar index is up 1.1% for the week, its strongest performance since the week ending July 23.

Hamish Pepper, fixed income and currency strategist at Harbour Asset Management, said the dollar is likely to be supported by an increase in U.S. rates, relative to the rest of the world, as "Fed rate cut expectations prove too aggressive."

"While core PCE inflation has dropped quickly to around 3%, this is not the 2% that the Fed targets and the last mile may require policy rates to stay at more elevated levels for longer than anticipated."

Inflation, as measured by the personal consumption expenditures price index, rose 2.6% in the 12 months through November.

The 10-year Treasury yield US10YT=RR broke through the psychological 4% mark and was last at 4.002% in Asian hours, up 14 basis points over the week. US/

The yen, which is highly sensitive to U.S. yields, weakened 0.04% to 144.70 per dollar on Friday after touching a more than three-week low of 144.955 earlier in the session.

Investors have tempered their expectations of the Bank of Japan exiting its ultra-loose monetary policy in the near term, with concerns over the earthquake that hit western Japan earlier this week casting further doubts on a policy shift.

In other currencies, the euro EUR=EBS was down 0.08% to $1.0934, on track for 0.9% decline in the week, snapping a run of three weeks of gains. Sterling GBP=D3 was little changed at $1.2677, but still on course for a small decline for the week.

The Australian and New Zealand dollars were headed for their first weekly drop in a month, with the Aussie AUD=D3 at $0.67035, while the kiwi NZD=D3 last bought $0.62305. AUD/

In cryptocurrencies, bitcoin BTC=BTSP fell 1.78% to $43,695.00. Ether ETH=, ETH=BTSP eased 1.23% to $2,247.92.

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Currency bid prices at 0600 GMT

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=EBS

$1.0936

$1.0944

-0.05%

-0.91%

+1.0956

+1.0935

Dollar/Yen

JPY=EBS

144.7250

144.6550

+0.05%

+2.61%

+144.9500

+144.6600

Euro/Yen

EURJPY=EBS

158.27

158.27

+0.00%

+1.70%

+158.6700

+158.2200

Dollar/Swiss

CHF=EBS

0.8505

0.8502

+0.06%

+1.08%

+0.8508

+0.8488

Sterling/Dollar

GBP=D3

1.2674

1.2682

-0.06%

-0.40%

+1.2696

+1.2675

Dollar/Canadian

CAD=D3

1.3362

1.3350

+0.09%

+0.80%

+1.3367

+1.3348

Aussie/Dollar

AUD=D3

0.6703

0.6707

-0.06%

-1.69%

+0.6718

+0.6693

NZ Dollar/Dollar

NZD=D3

0.6230

0.6236

-0.09%

-1.40%

+0.6244

+0.6225

All spots FX=

Tokyo spots AFX=

Europe spots EFX=

Volatilities FXVOL=

Tokyo Forex market info from BOJ TKYFX

World FX rates https://tmsnrt.rs/2RBWI5E

WRAPUP 1-POLL-Dollar down, but not ready to give in yet -FX analysts

Dollar Rebounds in New Year https://tmsnrt.rs/3vkTA6Z

(Reporting by Ankur Banerjee in Singapore; Editing by Jacqueline Wong)

((ankur.banerjee@thomsonreuters.com;; Mobile - +65 8121 3925; Follow on X (formerly Twitter): @AnkurBanerjee17;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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