Written by Karen Brettell
NEW YORK (Reuters) – The dollar jumped to a seven-week high on Friday and was on track to record its best week since September 2022 after a surprisingly strong September jobs report prompted traders to scale back their bets that the Federal Reserve would raise $50. Basis point interest.
The dollar is also set to have its best weekly percentage performance against the Japanese yen since 2009, as traders’ adjustment to a less dovish Federal Reserve and a more dovish Bank of Japan led to a rapid repricing in the currency pair.
U.S. nonfarm payrolls rose by 254,000 jobs last month, exceeding the 140,000 new jobs expected by economists polled by Reuters.
The unemployment rate also unexpectedly fell to 4.1% from 4.2% in August.
“It’s a great jobs report by any measure,” said Carl Shamotta, chief market strategist at Corby in Toronto. “I think the no-bottom scenario for the US economy has suddenly become much more plausible.”
“The expectation now is that the Fed will be more cautious in easing policy,” Shamota said.
Improving economic data and more hawkish comments from Fed Chairman Jerome Powell on Monday, when he backed away from expectations of continued deep interest rate cuts, led traders to scale back bets on a 50 basis point cut at the Fed’s next meeting, on November 6. -7.
Those possibilities were completely eliminated after Friday’s data. Traders now expect no chance of a 50 basis point rate cut, down from about 31% earlier Friday and 53% a week ago, CME Group’s (NASDAQ:) FedWatch tool shows. A 25 basis point cut is seen as almost certain, with traders also seeing little chance that the Fed will leave interest rates unchanged.
Bank of America expects the Fed to cut interest rates by 25 basis points per meeting through March 2025, followed by cuts of 25 basis points each quarter through the end of the year, Aditya Bhave, an economist at Bank of America, said in a report on Friday. 2025.
“The data flow since the Fed’s 50 basis point cut in September has been remarkably positive,” he said, describing Friday’s report as “A-plus.”
Chicago Fed President Austan Goolsbee called the data “remarkable” and said more labor market data along these lines would bolster his confidence that the economy is at full employment with low inflation.
The index reached 102.69, the highest level since August 16, and was on track for its best weekly percentage gain since September 2022.
The euro fell to $1.09515, the lowest level since August 15.
The dollar rose to 149.02 yen, the highest level since August 16.
New Japanese Prime Minister Shigeru Ishiba surprised markets this week when he said the economy was not ready for further interest rate hikes, a clear shift from his previous support for decades of aggressive monetary stimulus by the Bank of Japan.
The dollar also received support this week thanks to safe haven demand amid concerns about the expanding scope of the conflict in the Middle East.
Supreme Leader Ayatollah Ali Khamenei said on Friday that Iran and its regional allies will not back down. Iran raised the stakes when it fired missiles at Israel on Tuesday, partly in retaliation for Israel’s killing of Hezbollah Secretary-General Hassan Nasrallah.
The British pound fell to a low of $1.3070, its lowest level since September 12.
The Bank of England should move only gradually with interest rate cuts, Bank of England chief economist Hugh Bell said on Friday, a day after sterling fell 1% after Governor Andrew Bailey said the Bank of England may move more aggressively. To lower interest rates.
In cryptocurrencies, Bitcoin rose 1.95% to $61,958.
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