USD Gains Strength Against Yen Amid Economic Signals

By Kevin Buckland

Overview

The dollar reached a one-month high versus the yen on Thursday, thanks to positive signals from the U.S. jobs market, supporting the notion that the Federal Reserve can delay interest rate cuts.

Yen’s Decline

The yen faced substantial selling pressure after Japan’s new prime minister indicated no readiness for further rate hikes, following discussions with the central bank governor.

Euro Performance

The euro remained near a three-week low, affected by a dovish stance on inflation from normally hawkish European Central Bank policymaker Isabel Schnabel, increasing expectations for a forthcoming rate cut.

Safe-Haven Demand

The U.S. dollar saw increased demand, particularly following provocative actions by Iran, which launched 180 ballistic missiles into Israel, raising fears of extensive conflict.

Dollar Index Rise

The dollar index, reflecting the currency’s performance against several rivals, climbed to 101.70, marking a three-week high, extending a 0.45% increase from the previous session.

U.S. Employment Data

The ADP National Employment Report revealed 143,000 private sector jobs were added last month, bolstering expectations for a favorable monthly non-farm payrolls figure set to be released on Friday.

Rate Cut Predictions

Traders currently assign 34.6% odds for a 50 basis-point U.S. rate cut on Nov. 7, a decrease from prior days’ estimates, though still considered high according to analysts.

Although the ADP report is not always an accurate predictor of non-farm payrolls, it slightly diminishes the chances of a significant decline in the upcoming report.

Ray Attrill from National Australia Bank noted that a decent payrolls report might recalibrate predictions regarding the potential rate cut.

Currency Updates

The dollar gained 0.09%, reaching 146.575 yen, with earlier peaks hitting 146.885.

The euro stood at $1.10455, close to a session low of $1.10325.

Sterling remained stable at $1.3261, and the Australian dollar held at $0.6884.

Market Insights

Currencies sensitive to risk were initially sold off due to the Iranian attacks; however, the absence of immediate retaliatory actions by Israel allowed traders to regain confidence.

Attrill commented on how markets struggle to price in tail risks, suggesting a continued focus on economic fundamentals instead of reactive behavior to geopolitical events.