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Dollar Snaps Two-week Losing Streak on Strong US Jobs Data

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The dollar ended a two-week losing streak and climbed to one-week highs against the Japanese yen on Monday, as positive US jobs report sends the greenback higher in a market largely wary over the outlook for risky assets.

The US dollar index, a gauge of the currency’s strength against a basket of six major currencies, rose 0.3 percent to $95.583 after declining for two straight weeks.

Against the safe-haven yen, the greenback advanced 0.5 percent to 110.08 after hitting its highest since January 25 of 109.85 earlier in the session.

Chief Operating Officer Nick Twidale said the non-farm payroll was a strong number and is supporting the dollar, adding that a dovish Federal Reserve had hit the dollar/yen but rising stocks and solid US data have led to this bounce back.

Strong US Jobs Data Signals Less Fed Rate Hikes

Data from the US Labor Department on Friday showed the world’s largest economy added 304,000 jobs in January, beating expectations and marking as the highest since February 2018.

The Institute of Supply Management (ISM) also reported a better-than-expected manufacturing activity numbers for last month.

The latest jobs data helped reduced worries over a potential deceleration in the US economy, resulting in traders to cut expectations of the central bank cutting interest rates to prop up the economy later this year.

With most of Asia taking a holiday this week, the dollar was also driven higher by the latest round of trade talks between China and the US with the greenback on track to register its largest two-day gaining streak against the yuan in a year.

China’s financial markets are closed all week for the Lunar New Year, while other Asian markets are also closed for parts of the week, leaving bigger portion of market activity subdued.

Dollar sentiment has shifted in recent days with disappointing European data and expanding stimulus in China increasing appetite for the US currency, despite signs of Fed rate hikes being over for now.

The main change in market expectations between the close on Thursday and the close on Friday was less chance of a rate cut, not more chance of a rate hike, according to Chief Strategist Marshall Gittler.

Latest positioning data showed speculators raised their net long bets on the dollar to their highest since December 2015.
Higher US yields also supported the greenback, with the benchmark 10-year US Treasury yield rising 2.716 percent, having posted a four-week low of 2.619 percent earlier last week.

Elsewhere, the euro was trading down by 0.1 percent to 1.1436 against the dollar as cautious remarks from the European Central Bank (ECB) during its January meeting reinforced concerns about the euro zone being under pressure.

The British pound also dropped 0.2 percent 1.3053 against the dollar with traders expecting the sterling to stay volatile as uncertainty surrounding Brexit remained high. The Bank of England (BoE) is due to meet later this week and is widely expected to leave interest rates unchanged.

Head of G10 FX strategy Jermey Stretch said even though they have the Fed tapping on the brakes, they need to see more stability in Europe and clarity on Brexit before these currencies can rally meaningfully.

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