Dollar Stabilizes, Will It Last?
The US dollar strengthened slightly against most major G-10 currencies on Thursday, after US Treasury yields rose again ahead of tonight's official and private employment data. The Bloomberg Dollar Index edged up around 0.06% after plunging 0.4% on Wednesday, when sharply lower private payrolls data rekindled strong speculation that the Fed would cut interest rates at its meeting next week. The market is now awaiting initial jobless claims data and the Challenger layoffs report, which could further shift Fed policy expectations.
Meanwhile, the Australian dollar strengthened around 0.1% to around $0.6609. The Australian currency is supported by speculation that the Reserve Bank of Australia (RBA) could raise interest rates as early as February, especially as the yield on its 3-year bond has surpassed 4% for the first time since January. This expectation of a rate hike makes the Aussie more attractive compared to other currencies in the region.
Some analysts believe the current US dollar strength could be temporary. Peter Dragicevich, a strategist at Corpay Inc., believes that slowing US economic growth, a weakening labor market, and the prospect of lower interest rates going forward should put downward pressure on the dollar. He believes the dollar's current position remains "too high" compared to the difference in bond yields between the US and other countries. Currently, US Treasury yields are slightly higher by about 1 basis point, with the 10-year yield hovering around 4.07% and the 2-year yield around 3.49%.
In other currency markets, movement was relatively limited. The USD/JPY pair edged up 0.08% to around 155.38 after briefly dropping to 155.02 as 10-year Japanese government bond futures weakened. Meanwhile, the euro and pound sterling were under slight pressure against the dollar: EUR/USD fell around 0.1% to 1.1659, and GBP/USD also fell 0.1% to 1.3339. The dollar's next direction will be largely determined by tonight's US employment data and how it confirms—or destabilizes—market bets about a Fed interest rate cut. (Asd)
Source: Newsmaker.id
