Dollar firms after strong US jobs data, pushes yen through 160 level
By Hannah Lang
NEW YORK, June 5 (Reuters) – The dollar rose on Friday and is poised for a weekly gain of more than 1% after the U.S. economy posted another month of strong employment gains in May.
Nonfarm payrolls rose by 172,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said in its closely watched employment report Friday. Economists polled by Reuters had forecast payrolls would rise by 85,000 jobs in April, following a previously reported increase of 115,000 jobs.
That figure caused the dollar to rise sharply against the yen, which tested the 160-per-dollar mark this week, and prompted harsh warnings from Japanese officials as tensions in the Middle East bolstered safe-haven demand.
The yen was last at 160.150 against the dollar, losing 0.08%. It was heading for its fourth straight weekly loss against the dollar, following gains from official purchases in late April and early May.
The 160-per-dollar mark had previously triggered intervention, and its proximity prompted another warning from Finance Minister Satsuki Katayama, who said Japan was ready to respond at any time and reserved the right to take “decisive action” against excessive volatility.
The Bank of Japan is expected to raise interest rates this month as high energy import costs increase price pressure. Money markets also point to a second increase by the end of the year.
According to CME’s FedWatch tool, investors generally expect the Fed to keep interest rates unchanged at its meeting this month.
“The bar for the Fed to make changes is very high, and I don’t think this is going to cut it,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “I still think there’s a good chance of an increase before the end of the year, but we’ll have to see.”
The euro fell after the release of US employment data and last lost 0.75% to $1,152, despite expectations that the European Central Bank will raise interest rates up to three times this year. Sterling fell 0.64% to $1.33.
“From a euro perspective, continued high energy prices continue to be a drag on activity here,” said Jeremy Stretch, head of G10 FX at CIBC Capital Markets.
GULF HOSTILITIES SUPPORT DOLLAR DEMAND
Peace talks between the United States and Iran have reached an impasse, and a resurgence of hostilities this week has kept oil above $90 a barrel, raising risks to global growth.
Iran reaffirmed its support for Lebanese ally Hezbollah and demanded Israel withdraw from southern Lebanon, underscoring the difficulties facing an interim agreement to end the broader conflict between the United States and Iran.
