US Dollar Gains After Strong US Job Data, While the Yen Falls.
The dollar extended its gains on Monday after a strong US jobs report suggested the Federal Reserve could remain hawkish for longer, while the yen was hit by news that Bank of Japan Deputy Governor Masayoshi Amamiya was being considered for the position of next governor.
The Nikkei newspaper reported, citing anonymous government and ruling party sources, that Prime Minister Fumio Kishida's administration was nearing a decision on who would succeed current governor Haruhiko Kuroda, as well as two new deputy governors.
Following the report, the yen fell to a three-week low of 132.60 per dollar, and was last trading at 132.35, down 0.88%. According to Tapas Strickland, head of market economics at the National Australia Bank, Amamiya's dovish policy credentials raise doubts about the BOJ's eventual exit from its ultra-easy monetary policy. Many people, including opposition politicians and traders, have criticized the B OJ's loose policy settings for distorting market function.
"Amamiya has advised Kuroda on monetary policy since 2013, and is widely regarded as the most dovish of the contenders, shattering hopes that the BOJ's policy normalization could progress under the new chief," Saxo Markets strategists said. Amamiya was instrumental in developing Kuroda's asset-purchasing program in 2013 and has consistently advocated for the continuation of ultra-low interest rates. However, he stated in July that the BOJ must "always" consider ways to exit ultra-loose monetary policy.
The Labor Department's closely watched employment report released on Friday revealed that nonfarm payrolls increased by 517,000 jobs last month. A Reuters poll of economists predicted a gain of 185,000. On Monday, the dollar jumped higher and extended its rally. The US dollar reached a nearly 4-week high of 103.22 against a basket of currencies and was last trading at 103.18.
The Fed raised interest rates by 25 basis points on Wednesday, saying it had turned a corner in its fight against inflation, prompting investors to price in a more dovish path in the future. However, the eye-popping payrolls figure, combined with a rebound in the US services industry in January, has investors questioning whether the Fed is nearly finished with its monetary tightening policy.
"Of course, there are concerns that the much better-than-expected data will bolster the Fed's case for two more hikes and keeping rates elevated for longer," NAB's Strickland said. The euro was down 0.09% to $1.0783, while the pound was last trading at $1.203, down 0.17% on the day and at its lowest level since January 6. The Australian dollar fell 0.14% to $0.6912, while the New Zealand dollar dropped 0.33% to $0.6310.