The dollar remained stable in Asia on Friday and appeared poised to extend its longest winning streak in over a year, supported by rising bond yields and expectations of another strong U.S. jobs report.
This week, the dollar gained 0.5% against the yen, reaching 158.405 yen, and nearly 1% against a weakening British pound, which fell to a 14-month low alongside a selloff in gilts and concerns over British finances.
The dollar is set for a relatively steady week against the euro, trading at $1.0289, and has made modest gains against the Australian and New Zealand dollars.
The dollar index is on track for its sixth consecutive weekly gain, its longest streak since an 11-week run in 2023, as the U.S. economy outperforms others.
The index held steady in Asia, showing a 0.4% weekly rise to 109.33.
“We doubt the dollar will relinquish much of its recent gains,” said Chris Turner, global head of markets at ING, noting a shakeout in sterling long positions and potential upside for the dollar from U.S. jobs data due later in the day.
“Despite the risk of profit-taking, the dollar index found strong support below 108 earlier this week.”
Sterling dropped 0.23% to $1.2278, after reaching a 14-month low of $1.2239 on Thursday. The Australian and New Zealand dollars lingered near multi-year lows, with the Aussie, at $0.61905, almost breaking its 2022 low of $0.6170.
The New Zealand Dollar
Payrolls
U.S. non-farm payrolls data is expected to show an addition of 160,000 jobs in December, building on the 227,000 added in November, with unemployment holding steady at 4.2%.
A stronger-than-expected report could strengthen the case for fewer Federal Reserve rate cuts and may trigger another wave of selling in the already volatile bond markets.
Overnight, Philadelphia Fed President Patrick Harker stated that while he expects the U.S. central bank to cut interest rates, an immediate reduction is not necessary.
Markets have reduced expectations for U.S. rate cuts in 2025 to approximately 40 basis points, while concerns about President-elect Donald Trump’s potentially inflationary policies have driven up long-term yields.
“The market viewed the central banks’ signals about rate cuts as a sign that inflation was under control,” said Alexis Lavergne, investment specialist in fixed income at Janus Henderson Investors.
“This poses a risk for market participants going forward, particularly with the proposed pro-growth fiscal policies by President Trump for his second term, which are likely to be inflationary.”
Ten-year Treasury yields have risen nearly 9 basis points this week to 4.68% and are up 96 basis points since mid-September.
Ten-year gilt yields have increased by 22 basis points this week to 4.805%.
Interestingly, the turbulence in the bond market seems to have affected cryptocurrencies, with Bitcoin down 6% against the dollar this week, trading at $94,066.
Pepperstone’s head of research, Chris Weston, said, “I’m unsure how many in the crypto community are fully aware of the dynamics influencing U.S. rates and Treasuries, and many will likely be questioning what’s driving the movement in crypto.”
