The dollar firmed on Friday after a blowout August jobs report lifted bets on a Federal Reserve rate hike this month, even as it stayed on track for a weekly loss. The yen, the week's standout performer, pulled back after an explosive one-day surge but still held on course for its best week since July.
The U.S. dollar caught a bid on Friday after the August jobs report blew past expectations and pushed traders to raise their bets on a Federal Reserve rate hike later this month. At 15:40 ET, the U.S. dollar index climbed 0.3% to 99.18. The gauge was still down 0.5% for the week.
Jobs data revives Fed rate hike bets
According to the U.S. Bureau of Labor Statistics, nonfarm payrolls increased by 162,000 in August, almost triple expectations of 55,000. The unemployment rate held at 4.1%, and June and July payrolls were also revised a combined 55,000 higher.
The Fed's preferred inflation gauge, the PCE price index, has stayed above the central bank's 2% target for 65 straight months. A resilient labor market paired with that stubbornly high inflation pushed traders to add to rate hike bets, and as per the CME FedWatch tool, the odds of a 25-basis-point hike on September 16 rose to around 58% from about 52% before the data.
Treasury yields resumed their sell-off as a result, led by shorter tenors more sensitive to imminent tightening. The U.S. 2-year yield rose 4.5 basis points to 4.379%, while the 10-year yield climbed 1.8 basis points to 4.780%. According to José Torres, senior economist at Interactive Brokers: "President Trump rescued Treasuries this morning after a blockbuster nonfarm payrolls report sent yields soaring".
Yen eases after massive spike
The yen was the week's standout performer, though it weakened on Friday after an explosive 1.9% surge in the previous session that took it to a one-month high of 155.30, a move that triggered speculation over possible Japanese intervention. Despite no confirmed official action, the yen was still set for a 2.5% weekly gain, its strongest weekly performance since late July.
The rally has been driven by mounting bets that Bank of Japan Governor Kazuo Ueda and the Governing Council will deliver a 25-basis-point rate hike at their September 17-18 meeting. Japan's top currency diplomat Atsushi Mimura warned Friday that Tokyo remains watchful and in close contact with U.S. authorities, keeping short-sellers cautious.
Source: Investing.com
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