TOKYO- The US dollar paused for breath on Tuesday following its best rally this month against major peers as a resilient US labor market bolstered the case for a Federal Reserve rate hike next month.
The yen, which is highly sensitive to long-term US bond yields, managed to claw back some of Monday’s more than 1 percent slide, as the 10-year Treasury yield also slowed down in Tokyo trading after a sharp two-day climb. The Japanese currency came under additional pressure overnight as the new Bank of Japan governor, Kazuo Ueda, vowed to stick with ultra-easy stimulus setting for the time being.
Leading cryptocurrency bitcoin briefly touched $30,000 for the first time since June.
The US dollar index – which measures the greenback against six major counterparts, including the yen – slipped 0.06 percent in early Asian trading, following a 0.39 percent advance at the start of the week.
The dollar eased 0.16 percent to 133.39 yen, after jumping 1.1 percent overnight.
Traders now see the Fed as 74 percent likely to raise rates by another quarter point on May 3, after data released on Good Friday showed US employers continued to hire at a strong pace in March, pushing down the jobless rate. Last week, money markets priced a hike next month as a coin toss.
The consumer price index (CPI), due on Wednesday, will be the next major clue for Fed policy direction.
Ten-year Treasury yields reached 3.436 percent overnight before settling around 3.41 percent in Tokyo. They had dipped to a seven-month low of 3.253 percent on Thursday.
The dollar index dropped to a two-month low of 101.40 on Wednesday.
“Financial markets have been too pessimistic about the US economy since several small US banks collapsed in March,” Commonwealth Bank of Australia strategists Joseph Capurso and Kristina Clifton wrote in a client note, referring to the demise of SVB and Signature Bank.
“Strong underlying CPI is likely to be the catalyst for a change in market pricing for May, and delay pricing for the start of rate cuts,” they said, postulating the dollar index could lift toward the 100-day moving average at 103.91 this week. — Reuters
