The dollar moved higher on Thursday after fresh data showed that new U.S. unemployment claims fell unexpectedly last week, reinforcing market expectations that the Federal Reserve is likely to keep interest rates unchanged for the coming months.
According to the U.S. Labor Department, initial claims for state unemployment benefits declined by 9,000 to a seasonally adjusted 198,000 in the week ending January 10. Economists surveyed by Reuters had anticipated 215,000 new claims, making the actual figure a notable downside surprise.
“We are at the lower end of the range,” said Lou Brien, a strategist at DRW Trading. He noted that investors are likely adjusting their positions slightly, which in turn is helping to push the dollar higher.
Brien cautioned, however, that U.S. labor data may overstate job growth because of weaknesses in the so-called birth-death model used in payroll calculations, as well as other structural factors. He added that annual revisions to payroll figures could eventually reveal a much softer labor market, although such revisions are released with a considerable delay.
Futures tied to the federal funds rate have shifted expectations for the next interest-rate cut to June, reflecting stronger-than-expected labor data and continued concern among Fed officials about persistently high inflation.
December’s employment report, released on Friday, showed the unemployment rate falling more than economists had forecast, reaching 4.4%.
Speaking on Thursday, Federal Reserve Bank of Chicago President Austan Goolsbee said that, given the clear signs of stability in the job market, the central bank should remain focused on bringing inflation down.
The dollar index, which tracks the greenback against a basket of major currencies including the euro and the yen, rose 0.28% to 99.35. The euro slipped 0.29% to $1.1608.
Risk sentiment also improved after U.S. President Donald Trump said he had been informed that killings linked to protests in Iran were easing, adding that he believed there was no current plan for large-scale executions. His comments signaled a more cautious, wait-and-see approach following earlier threats of intervention.
The Japanese yen weakened amid concerns that Japanese Prime Minister Sanae Takaichi may gain more flexibility to pursue expansionary fiscal policies. Her party’s secretary general said on Wednesday that Takaichi plans to dissolve parliament next week and call a snap election in order to secure public backing for increased government spending.
The yen slipped 0.05% against the dollar to 158.54, remaining below the 18-month low of 159.45 reached a day earlier as traders stayed alert for potential official intervention to support the currency. Japanese authorities reiterated on Wednesday that no options to counter excessive foreign-exchange volatility had been ruled out.
In the cryptocurrency market, bitcoin declined 1.90% to $95,655.
