Nonfarm payrolls rose by 172,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said Friday in its closely watched employment report. Economists polled by Reuters had forecast an increase of 85,000 jobs in payrolls, after an increase of 115,000 reported earlier in April.
The number sent the dollar up sharply against the yen, which has been testing the 160-per-dollar barrier this week, drawing sharp warnings from Japanese officials as Middle East tensions fuel safe-haven demand.
The yen was last down 0.08% against the dollar at 160.150. It was headed for a fourth consecutive weekly loss against the dollar, which was helped by incredible gains from official buying in late April and early May.
The 160-per-dollar mark had earlier triggered intervention and its approach prompted another warning from Finance Minister Satsuki Katayama, who said Japan was ready to respond at any time and reserved the right to take “decisive measures” against excessive volatility.
The Bank of Japan is expected to raise interest rates this month, as higher energy import costs add to price pressures. Money markets also point to another hike by the end of the year.
According to CME’s FedWatch tool, investors widely expect the Fed to keep rates unchanged when it meets this month.
“The Fed’s rate of change is very high, and I don’t think it’s going to slow down,” said Mark Chandler, chief market strategist at Bannockburn Global Forex. “I still think there’s a good chance of an increase before the end of the year, but we’ll have to see.”
Despite expectations of three European Central Bank rate hikes this year, the U.S. The euro fell after the release of the jobs data and was last down 0.75% at $1.152. The pound fell 0.64% to $1.33.
“From a euro perspective, elevated energy prices remain a drag on activity there,” said Jeremy Stretch, head of CIBC Capital Markets G10 FX.
Gulf hostilities support dollar demand
The US Peace talks between U.S. and Iran are at an impasse, and this week’s hostilities have kept oil above $90 a barrel, raising risks to global growth.
Iran has reaffirmed support for its Lebanese ally Hezbollah and demanded Israel withdraw from southern Lebanon, underscoring the complexities facing an interim deal to end the broader conflict between the US and Iran.
Iran has made a cease-fire between Israel and Hezbollah a condition of any peace deal with Washington to resolve the regional war, now in its fourth month, and resume shipping through the Strait of Hormuz.
“As far as the resumption of peace talks between the US and Iran is concerned, it is at square one,” David Morrison, senior market analyst at Trade Nation, said in a research note. “But, as has been the case since late March, investors have chosen to look past the current hostilities on the assumption that the war will end soon.”
The dollar has been the stand-out in foreign exchange this week, rising 0.63% against a basket of major currencies and about 1.3% over the past month. That was supported by strong US data, expectations of a Federal Reserve rate hike and safe-haven demand amid concerns about the impact of higher energy prices – due to the closure of the Strait of Hormuz – on importers such as the euro zone, Japan and China.
Among cryptocurrencies, Bitcoin was set for a 19% weekly drop after hitting its lowest level since February. It was last down 6.63% at $59,373.
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