The dollar started the week on a strong note Monday, leaving its peers languishing near multi-year lows after a U.S. jobs report that highlighted the world’s largest economy’s outperformance compared to the rest of the world.
The euro and New Zealand dollar remained near their lowest level in more than two years at $1.0242 and $0.5565, respectively, at the start of the Asian session. With Japanese markets closed due to holidays, trading was limited.
The Australian dollar struggled to move away from its lowest level in over four years of $0.6139. It last traded 0.1% higher at $0.6153.
Data on Friday showed that U.S. job growth accelerated unexpectedly in December, while the unemployment rate fell to 4.1%, with the labor market ending the year on a strong base, leaving traders sharply reducing bets that the Federal Reserve will cut rates this year.
“This latest round of data highlights that the exceptional nature of the US economy remains a key market theme heading into 2025,” said Nick Rees, head of macroeconomic research at Monex Europe.
“The US labor market has stabilized but is not continuing to unblock, and this, combined with the risks of rising inflation arising from the new (Donald) Trump administration…should support an extended pause in labor market easing by the FOMC.”
Markets are now pricing in just 27 basis points of Fed rate cuts this year, down from around 50 basis points at the start of the year.
The idea that US President-elect Donald Trump’s plans for high import tariffs, tax cuts and immigration restrictions could stoke inflation is bolstering expectations of a cycle less aggressive easing. He will return to the White House in a week.
Before then, US inflation data is due on Wednesday, and any upside surprises could threaten to close the door to easing altogether. Several Fed officials are also scheduled to speak this week.
The US dollar held steady at 109.67 against a basket of currencies, approaching its highest level since November 2022.
Against the dollar, the yen fell 0.12% to 157.92. The extent of the yen’s decline was dampened by news that Bank of Japan policymakers may raise their inflation forecasts at a policy meeting this month, a prelude to another rise in rates. rate.
Sterling rose 0.07% to $1.2204, but pulled away from a 14-month low of $1.2239, also under pressure from domestic concerns over rising borrowing costs and growing unease over Britain’s finances.
“It appears all roads lead to a decline in sterling, and gains should be contained and quickly sold off,” said Chris Weston, head of research at Pepperstone.
In China, the offshore yuan was little changed at 7.3605 per dollar.
The People’s Bank of China suspended its purchases of Treasury bonds on Friday, briefly raising yields and spurring speculation about intensifying defense of China’s currency.
