By Rae Wee
SINGAPORE, Feb 7 (Reuters) - The dollar hovered near a
one-month peak on Tuesday as traders raised their forecasts of
U.S. Federal Reserve interest rate levels needed to tame
inflation, as a stubbornly resilient labour market remains
largely immune to aggressive rate hikes.
Markets were still reeling from the shock of Friday's jobs
report, which showed that non-farm payrolls surged by an
eye-watering 517,000 in January, well above expectations.
The report, which wrongfooted traders banking on an imminent
pause in the Fed's rate-hiking cycle, gave the greenback a leg
up and sent the pound tumbling to a one-month low of
$1.2006 in the previous session. It was last 0.09% higher at
$1.2033.
Similarly, the kiwi rose 0.06% to $0.6308, but was
not far from Monday's one-month trough of $0.6271.
The euro gained 0.06% to $1.0733, having slid to
$1.0709 in the previous session, the lowest since Jan. 9.
"Since last Friday, (when) the U.S. reported a stronger than
expected jobs number, this has reversed expectations that the
Fed would pivot in its monetary policy," said Tina Teng, market
analyst at CMC Markets.
"I don't think the jobs number is key ... but it's
definitely a major impact on (the Fed's) monetary policy."
U.S. Treasury yields have risen on the back of higher rate
expectations, with two-year yields touching a
one-month high of 4.493% on Monday. Two-year yields last stood
at 4.4347%.
The benchmark 10-year yields were last at
3.6305%, having similarly climbed to a four-week peak of 3.6550%
in the previous session.
Futures pricing show that markets are expecting the
Fed funds rate to peak just above 5.1% by July, compared with
expectations of less than 5% prior to Friday's jobs report. The surging greenback pushed the U.S. dollar index to
a near one-month high of 103.76 on Monday, and it was last
marginally lower at 103.52.
Ahead of the Reserve Bank of Australia's (RBA) interest rate
decision later on Tuesday, the Aussie gained 0.23% to
$0.6899.
The RBA is widely expected to lift the cash rate by 25 basis
points, and the focus will be on the accompanying statement for
clues on the likely path for monetary policy this year.
Elsewhere in Asia, the Japanese yen rose 0.2% to
132.37 per dollar, but remained pinned near Monday's one-month
low of 132.90 per dollar.
Data on Tuesday showed that Japan's real wages rose in
December for the first time in nine months, though uncertainty
remains over whether pay hikes will continue to sustain the
country's economic recovery.
A newspaper report on Monday said that Japan's government
has sounded out Bank of Japan (BOJ) Deputy Governor Masayoshi
Amamiya to succeed incumbent Haruhiko Kuroda as central bank
governor. Amamiya is considered by markets as more dovish than
other contenders.
"I don't think the BOJ will reverse monetary policy," said
CMC's Teng, on market hopes the central bank will abandon its
yield curve control policy once a new governor takes office.
"There are still economic concerns, there are still
recessionary risks."
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(Reporting by Rae Wee; Editing by Jamie Freed)
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