Dollar steadies, on track for weekly loss after job growth blowout

NEW YORK, April 5 – The dollar strengthened on Friday but was still set for a weekly loss after data showed US employers hired far more workers than expected in March, potentially delaying anticipated interest rate cuts from the Federal Reserve this year.

Nonfarm payrolls increased by 303,000 jobs last month, the Labor Department said in its
closely watched employment report on Friday. Economists polled by Reuters had forecast 200,000 jobs, with estimates ranging from 150,000 to 250,000.

The dollar index was last up 0.048% at 104.27, after rising to 104.690 It has had a turbulent week, falling from a five-month high to a two-week low after an unexpected slowdown in US services growth supported expectations of Fed rate cuts.

US interest rate futures pared back the odds of a rate cut in June to 54.5% after the release of the jobs report, according to CME Group’s FedWatch tool.

“It’s really encouraging the market to get more and more comfortable with this fact that we know rates have to come down, but do they really need to come down quickly? And do they need to come down as much?” said Amo Sahota, director at Klarity FX in San Francisco.

Investors have reeled in expectations of how much the Fed might cut rates this year, with US rate futures now pricing in two cuts in 2024.

“That should continue to underpin dollar strength on a broad basis,” said Brad Bechtel, global head of FX at Jeffries.

But economic strength and higher prices of commodities, including oil, copper, coffee, and cocoa, are complicating the inflation picture.

The dollar rebounded after comments on Thursday from Minneapolis Fed President Neel Kashkari, a non-voter on this year’s policy-setting committee, that rate cuts might not be required this year if inflation continues to stall.

Against the dollar, the Japanese yen weakened 0.14% to 151.540.

Japanese authorities have continued to push back against excessive currency weakness, and will likely intervene to buy the yen if it breaks well below 152 per dollar, former top Japanese currency official Tatsuo Yamazaki said on Thursday.

Japanese Finance Minister Shunichi Suzuki on Friday reiterated the government’s resolve to take appropriate action against sharp yen falls.

Bank of Japan Governor Kazuo Ueda said the Japanese central bank could “respond with monetary policy” if weakness in the yen affected the nation’s economy in ways that are hard to ignore, the Asahi newspaper reported on Friday.

Ueda also said inflation would likely accelerate from “summer toward autumn” as bumper pay hikes push up prices, his strongest hint yet that another interest rate hike was possible in coming months.

Elsewhere, the euro was last flat at 1.0837, while sterling eased 0.04% to 1.264. The Aussie was last down 0.08% to 0.658.

In cryptocurrencies, bitcoin fell 0.53% to USD 67,589, while ether ETH was USD 3,328.7, up 0.09%.

(Reporting by Hannah Lang in New York; additional reporting by Amanda Cooper in London and Brigid Riley in Tokyo; Editing by Jamie Freed, David Evans, Chizu Nomiyama, Paul Simao, and Richard Chang)