After falling across the board yesterday, the dollar recouped some of its losses overnight ahead of this morning’s all important jobs report.
The greenback touched a fresh three-year low against the Euro yesterday and is trading at a four-month low versus the Canadian dollar. The dollar is in danger of an eight consecutive weekly drop if it does not experience a minor rally today. That would mark the worst weekly run in more than seven years.
However, the greenback has been able to extend its gains in early trading as the Non-Farm Payrolls report was gleaming. The economy added 200K jobs in January, beating expectations of 180K jobs. December’s dismal print was also upwardly revised. Most importantly, average hourly earnings rose a more than expected 2.9% from a year earlier, the most since 2009. The unemployment rate held at 4.1%. The rosy data comes after the Federal reserve held a slightly hawkish stance in its policy statement earlier this month and is on track to raise interest rates another quarter of a point in March.
The Japanese yen fell a half a percent against the U.S. dollar after the Bank of Japan boosted bond purchases to rein in rising yields. The BoJ announced its first unlimited fixed-rate bond-purchase operation since July, offering to buy 10 year benchmark securities at 0.11%. The move is not unprecedented as the central bank stepped in twice last year by offering to buy an unlimited amount of debt when the yield crossed the 0.10% mark. According to a senior official, the BoJ’s actions were a response to a recent rise in long-term yields and were meant to enable it to firmly adhere to its yield target. The target is “around zero percent.” If current ranges hold, the Japanese yen would experience its biggest weekly decline in almost four months.
The Euro has taken a backseat to the U.S. dollar this morning on good U.S. data. However, the Euro had its best close in three years against the greenback last night. A light data day will not help the common currency. Italian CPI was slightly better than expected, but has not had a material effect on the currency. While the Euro will likely remain elevated versus the U.S. dollar, it appears that some of its short-term rally has lost steam.