The U.S. dollar strengthened against most major currencies on Thursday. The move came after signs of faster U.S. job growth suggested the Federal Reserve may pause its rate-cut cycle in December.
Fresh labor data showed employers added more jobs than expected in September, even though the unemployment rate increased. Nonfarm payrolls rose by 119,000, well above the 50,000 jobs economists had projected. The unemployment rate climbed to 4.4% from 4.3% in August. The report was delayed due to the extended government shutdown.
Uto Shinohara, senior investment strategist at Mesirow Currency Management, noted that September’s figures were mixed. Payrolls came in at more than double expectations, August’s numbers were revised into negative territory, and unemployment edged higher. He added that because the data was stale and avoided a sharp downside surprise, risk sentiment recovered following recent declines in global markets.
The yen continued to weaken, falling 0.41% to 157.82 per dollar. The U.S. dollar briefly touched 157.78 yen, its strongest level since January, putting the currency on track for a fourth straight daily loss.
Japan prepares major stimulus plan
Since Sanae Takaichi became leader of Japan’s ruling party last month, the yen has dropped about 6%, even as Japanese bond yields rose. Markets remain uneasy about the size of borrowing required to finance her planned stimulus measures. The new government is preparing a package worth more than 20 trillion yen, the largest since the pandemic. Takaichi is expected to unveil the plan on Friday.
Finance Minister Satsuki Katayama said the government is monitoring currency movements “with a high sense of urgency.”
Analysts believe authorities may wait until the yen weakens toward 160 before considering intervention, a level last seen during action taken in July.
Standard Chartered strategist Steve Englander said concerns about Japan’s fiscal outlook continue to weigh on the currency, and intervention alone cannot address those deeper issues.
Fed minutes reduce likelihood of a December cut
Elsewhere, the euro, Swiss franc, Australian dollar, and British pound all slipped against the dollar. Minutes from the Federal Reserve’s October meeting showed that many officials opposed a December rate cut, although some still viewed it as possible.
Fed funds futures now imply a 39% probability of a 25-basis-point cut at the December 10 meeting, according to CME’s FedWatch tool.
The euro fell 0.15% to $1.1522 after touching a two-week low. Sterling traded at $1.3084, also near its weakest level this month.
The U.S. dollar index rose 0.16% to 100.24, testing the six-month highs reached earlier in November.
Englander commented that although U.S. data is not overwhelmingly strong, there may still be room for an “insurance cut.” However, he noted the Federal Open Market Committee may not share that view.
