Dollar advances as US job growth tops economists’ expectations

THE US dollar rose against a basket of currencies on Friday (Jun 3) after a better-than-expected US employment report pointed to a tight labour market that could keep the Federal Reserve on an aggressive path of interest rate hikes. Non-farm payrolls increased by 390,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Economists polled by Reuters had forecast payrolls increasing by 325,000 jobs in May.

The US Dollar Currency Index, which tracks the greenback against 6 other major currencies, was 0.4 per cent higher at 102.16 after rising as high as 102.22 following the jobs report. For the week, the index was up about 0.5 per cent.

The Fed has raised interest rates by 3 quarters of a percentage point this year, and most Fed policymakers back raising interest rates another half of a percentage point at each of their next 2 meetings.

Investors have mixed views on the greenback, which is still close to 2-decade highs against a basket of peers. George Saravelos, global head of forex research at Deutsche Bank, said the dollar is “pricing a safe-haven risk premium that is so extreme it rarely has persisted over time and is now in the process of unwinding”.

Bullish analysts argue that the Fed’s tightening cycle is based on a sturdier growth story than Europe’s, especially after the Russian oil embargo, which might hurt the eurozone economy.

The dollar rose 0.8 per cent to a more than 3-week high of 130.85 yen, with the Japanese currency not far from the 2-decade low touched in May as the Bank of Japan (BOJ) stuck to its super-low interest rate policy stance.

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Dollar edges up against euro, hits two-week high vs yen

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BOJ governor Haruhiko Kuroda - who has said the bank will not roll back its massive monetary stimulus as the recent rise in inflation was driven mostly by raw commodity costs and likely temporary - said on Friday that it was undesirable for prices to rise too much when household income growth remains weak.