Dollar Extends Post-Jobs Drop, Yen Weak on PM Exit
A Bloomberg gauge of the dollar on Monday extended losses seen in the wake of the August jobs report as Treasuries rallied. The yen erased a decline that came after Prime Minister Shigeru Ishiba said he would step down, while the euro rose despite a vote of no confidence in the French government.
The Bloomberg Dollar Spot Index was down 0.3%, extending Friday’s 0.4% decline.
“The signal/noise ratio for US data has increased significantly, with the latest hard data confirming the direction of soft data,” said Alvaro Vivanco, the head of strategy at TJM FX.
“All of this has reaffirmed my conviction to remain short dollars,” he added.
Swaps traders more-than-fully price a 25bp rate cut from the Federal Reserve next week; Treasury yields fall across curve with 10-year at 4.05%.
Focus now turns to US CPI data out Thursday with Fed officials in blackout period; consensus sees headline and core CPI printing at 0.3% growth MoM.
USD/JPY falls less than 0.1% to 147.35, paring earlier rise of as much as 0.8%.
Traders attempt to map out who Ishiba’s successor might be, and what a new leader would mean for monetary policy.
Euro gains 0.4% to EUR/USD 1.1765, the strongest since July 28
French Prime Minister Francois Bayrou is set to resign after losing a confidence motion in parliament
French politics remain in background for now as overnight vol on common currency spikes, then retreats and trades steadily, around 8%
Swiss franc outperforms G-10 versus dollar, USD/CHF down 0.6% to 0.7930
The People’s Bank of China extended 150 billion yuan of local-currency swap deal with the Swiss National Bank for another five years, according to a statement from PBOC
Loonie underperforms as traders digest Canada’s own poor jobs figures; USD/CAD down 0.2% to 1.3808.
Source: Bloomberg
