FX Roundup: Dollar soars on US jobs data

The dollar soared against a basket of global currencies on Friday, with a positive US jobs report increasing the likelihood of an interest rate hike by the Federal Reserve as early as December.

US non-farm payrolls grew by 271,000 in October, according to the Bureau of Labour Statistics, well above the market consensus forecast for a gain of 180,000. The unemployment rate edged lower by a tenth of a percentage point to 5.0%, as the participation rate held steady at 6.24%.

Furthermore, average hourly wages paid to US workers rose 0.4% last month, registering the biggest annual increase since mid-2009. In response, the greenback, which had been registered gains for much of the week, extended the rise further.

At 1513 GMT, the dollar was up 0.87% against the yen exchanging at JPY122.81. In tandem, the pound and euro fell 0.08% and 1.26% to exchange at $1.5077 and $1.0747 respectively. Completing a clean sweep of major crosses for the fourth successive session, the greenback also rose 0.81% against the Swiss franc, exchanging at CHF1.0034, archiving parity in its favour during late European trading.

Kit Juckes, head of forex at Societe Generale, said monetary policy divergence was back in Fashion. “Fed Chair Janet Yellen sounds relatively hawkish. Bank of England Governor Mark Carney sounds somewhat dovish, and ECB President Mario Draghi sounds like a man on a mission to ease further. Monetary policy divergence is driving currency trends again.

“With expectations shifting, the Fed may have to deliver a rate hike while the ECB may have to ease in December to drive the dollar higher. More interesting though is how broader risk markets react to rising Fed hike expectations, with implications for the higher-yielding currencies that have done well in Q4 thus far.”

In line with broader forex market trends, the greenback traded higher against commodities linked currencies such as the Norwegian Krone by 1.44% changing hands at NOK8.6759, alongside gains of 1.57%, 1.36% and 0.99% against the Mexican peso, Brazilian real and Canadian dollar, changing hands at MXN$16.8664, BRL3.8314 and CAD$1.3301 respectively.

FXTM research analyst Lukman Otunuga said, “If dollar appreciation becomes the main theme in the global currency markets, the EUR/USD may continue to decline, which may ease some pressure away from the ECB.

“Overall, the conclusion to take from the jobs data is that the probability of a US rate hike in December has inflated considerably.”

Late afternoon European trading also saw the Australian dollar fall against its US counterpart by another 1.30% changing hands at US$0.7051. Concurrently, the New Zealand dollar also fell 1.47% against the greenback changing hands at US$0.6516.