Dollar Moves Forward as US Job Growth Exceeds Expectations

On Friday, the US dollar saw its value go up against a basket of major currencies after a US employment report turned out to be better than expected. The report indicated a tight labor market, which means that it is likely for the Federal Reserve to stick to its aggressive strategy when it comes to hiking interest rates. According to the Labor Department, the previous month saw an increase of 390,000 in non-farm payrolls. The market had been keeping a close eye on the employment report on Friday. Economists had predicted that there would be an increase of about 325,000 jobs and the results exceeded their expectations.

There was a 0.4% increase in the US dollar index, which tracks the performance of the greenback against six of the other prominent currencies in the market. It rose to 102.16 and even went as high as 102.22, after the jobs report was released. As far as the whole week is concerned, the dollar index recorded an increase of about 0.5%. Currency analysts said that the non-farm payrolls data had turned out to be quite solid. They said that given the strong numbers, it is expected that the interest rate hikes would continue in the second half of the year.

This year has seen the Federal Reserve increase interest rates by almost 3/4th of a percentage point. Moreover, most of the policymakers at the Fed are now in favor of increasing the rate by another half a percentage point in each of the two meetings of the central bank that are scheduled this year. The President of the Cleveland Federal Reserve, Loretta Mester stated on Friday that they were looking for any indication that the inflation had reached some peak before they decide to cooldown their hiking spree. Policymakers have said that both June and July will see increments of at least half a point in the rate.

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As far as the greenback is concerned, the investors have had mixed views. The currency remains close to highs of two-decades against a basket of other currencies. Forex experts believe that the safe-haven risk premium that can be seen in the dollar’s price has gotten so extreme that it has not been seen before. Analysts who have a bullish point of view believe that the tightening cycle of the Federal Reserve stems from a stronger growth of the economy than what can be seen in Europe. This is particularly because the euro zone economy will likely suffer more because of the embargo imposed on Russian oil.

There was an 0.8% increase in the US dollar against the yen, which brought it to a high of three weeks at 130.85. Japan’s currency is quite close to the two-decade low that it had reached back in May. This was after the decision of the Bank of Japan (BoJ) to keep its interest rate super-low. Haruhiko Kuroda, the Governor of the Bank of Japan, said that prices should not rise too much when there is a weak growth in household income.

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