The yen and euro found some relief on Thursday as the dollar and US Treasury yields slowed down following lower-than-expected US private payrolls data. This led investors to reduce their bets on the Federal Reserve raising rates again this year. The dollar index, which tracks the greenback against six other currencies including the euro and yen, dropped 0.07% to 106.68 after Wednesday’s data revealed that US private payrolls had increased less than anticipated in September.
While analysts cautioned that more evidence was needed to determine the speed at which the labour market is cooling, money markets reduced their expectations for a Fed rate hike in November. They now believe there is almost an 80% chance that the central bank will maintain its current rates. This contrasts with Tuesday’s data from CME Group, which showed a 28.2% chance of another hike.
As a result of the lower US Treasury yields, the yen, which is typically sensitive to these yields, traded at 148.92, increasing 0.13% against the dollar. On Tuesday, the yen had reached 150.165, its weakest level since October 2022.
Ulrich Leuchtmann, the head of FX and commodity research at Commerzbank, suggested that market participants were more impacted by the negative US data due to ambitious euro/dollar levels below $1.05 and 10-year T-note yields above 4.80% requiring substantial data to support them.
The euro rose 0.13% to $1.0518, having fallen on Tuesday to its lowest level this year at $1.0448. Over the past three months, the single currency has dropped more than 14% against the dollar.
Peter Kazimir, a European Central Bank policymaker, stated that last month’s rate hike was likely the last, although the bank could not be certain until seeing data available at meetings in December and March.
Speculation had emerged earlier this week as the yen sharply recovered after surpassing the 150-line, sparking anticipation of intervention to support the currency. However, Bank of Japan money market data indicated on Thursday that Japanese authorities had most likely not intervened.
Finance Minister Shunichi Suzuki declined to comment on whether Tokyo had intervened, and repeated that currency rates must move stably, reflecting fundamentals.
In addition to lower US Treasury yields, the yen also gained support from a drop in oil prices on Thursday, although market experts believe this relief will be short-lived.
According to a Reuters poll, strategists are forecasting a weaker dollar in the future.
Sterling remained flat against the dollar at $1.2137 after falling on Wednesday to its lowest level since March.
Bank of England Deputy Governor Ben Broadbent stated that it is uncertain whether interest rates will increase further.
More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )