October 3, 2022

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The US dollar posted big gains after strong jobs data

The dollar rose across the board on Friday, posting its biggest daily target since mid-June against the yen, after a stronger-than-expected US wage report indicated that the Federal Reserve may need to continue to maintain short-term interest rates.

The US Dollar Index, which measures the greenback against a basket of major currencies, extended its earnings amid news that non-farm payrolls rose by 528,000 last month. It was the biggest gain since February, well above economists’ expectations.

The DXY, still its lowest level in mid-July, rose 0.8% to 106.57. It was about 0.2% higher before the US Department of Labor’s employment report. The index rose about 0.6% during the week.

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Axel Merck, chief investment officer at Merck Investments, said the relationship was much stronger than expected. This means that at this point the Fed can no longer change course. The Fed has to keep raising rates and people who want a slower hike have been sidelined for this report.

He also added that the dollar strengthened against almost everything. The United States did well when the mood was one of slowdown in the world.

Against the yen, the dollar rose 1.5 percent to 134.99 yen. Over the course of the week, the dollar rose 1.3% against the yen.

The Federal Reserve raised its benchmark interest rate by one percentage point last week. The US central bank has raised interest rates by 225 percentage points since March, but investors are considering whether the Federal Reserve may be less aggressive in raising rates in the future. UXD is above 11% for the year, amid the prospects of a rate hike.

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