currency futures basics
Fundamental Analysis

Dollar Surges on US Labor Market Resilience

  • The Federal Reserve might maintain its hawkish stance for longer.
  • BOJ Deputy Governor Masayoshi Amamiya might be considered for future governor.
  • US nonfarm payrolls grew by 517,000 jobs in January.

Currency futures were on the back foot on Monday as the dollar strengthened. The dollar held steady against its peers after solid US jobs data gave the impression that the Federal Reserve might maintain its hawkish stance for longer. 

According to the highly anticipated employment report released by the US Labor Department on Friday, nonfarm payrolls grew by 517,000 jobs in January.  

The dollar subsequently jumped and remained steady, pushing major currency futures lower. The US dollar recently traded at 103.03 against a basket of currencies after reaching a nearly 4-week high of 103.22. 

Investors expect a more dovish course moving forward after the Fed raised rates by 25 basis points on Wednesday and stated that the fight against inflation was at a turning point.

However, investors are unsure whether the Fed is nearly finished tightening policy after the startling payrolls report and January’s recovery in the US services sector.

News that BOJ’s Masayoshi Amamiya, the current deputy governor, was a candidate for governor in the future hurt the yen.

Yen per dollar (Source: Bloomberg)
Yen per dollar (Source: Bloomberg)

The Nikkei newspaper stated that the administration of Prime Minister Fumio Kishida was in the final stages of selecting two new deputy governors and the successor to current governor Haruhiko Kuroda. Yoshihiko Isozaki, the deputy chief cabinet secretary, claimed during a news conference on Monday that the Nikkei report was false.

After hitting a three-week low of 132.60 earlier in the session, the yen dropped 0.42% to 131.75 against the dollar.

Among the candidates, Amamiya is regarded as the most dovish, which dashes hopes that the BOJ’s policy normalization will proceed under the new leader. Since 2013, Amamiya and Kuroda have collaborated on monetary policies. 

Many people, including opposition lawmakers and merchants, have criticized the BOJ’s lax policy settings for distorting market function.

Amamiya was a big contributor to the fashioning of Kuroda’s asset purchase program in 2013 and often advocated for the continuation of extremely low-interest rates. However, he added in July that the BOJ must “always” explore how to end its ultra-loose monetary policy.

Increased tension between the United States and China following Saturday’s shooting down of a suspected Chinese spy balloon also contributed to the safe-haven dollar’s rise.