The recent soft U.S. jobs report has caused a stir in the currency markets, with the dollar remaining largely stable. Despite last week’s strong gains, the yen weakened on Monday to start the week. This came after the currency hit a three-week high of 151.86 per dollar on Friday following suspected Japanese government interventions aimed at pulling the currency away from a 34-year low. The dollar lost further ground after the release of the jobs data, causing the yen to weaken by 0.43% to 153.62 per dollar in early trading.
Following the weak U.S. jobs report, the offshore yuan strengthened against the dollar. The data also prompted Fed Chair Jerome Powell to confirm the central bank’s easing bias. Japan’s interventions to push the yen higher also played a role in the offshore yuan’s gains. The offshore yuan was last seen at 7.1959 per dollar, having gained more than 1% over the previous week.
The Bank of Japan’s efforts to prop up the yen by spending over 9 trillion yen last week have only bought some time for the fragile currency. Analysts view the currency as a sell, despite the intervention. The Commodity Futures Trading Commission’s weekly report showed that non-commercial traders reduced their yen short positions to 168,388 futures contracts, still close to their largest bearish positions since 2007.
The U.S. job growth slowdown in April, along with a drop in annual wages below 4.0%, has raised optimism for a “soft landing” for the economy. Market expectations now include 45 basis points of cuts this year, with a rate cut in November priced in fully. The Fed held interest rates steady but signaled a leaning towards eventual rate cuts, albeit possibly delayed. Citi strategists projected just enough cooling in inflation to meet the Fed’s bar for a summer rate cut.
The dollar index, which measures the U.S. currency against six rivals, saw a three-week low at 104.52 on Friday, rebounding to 105.12. Meanwhile, the euro was up 0.07% at $1.0765, and the sterling was last at $1.2547, up 0.02% on the day.
The impact of the U.S. jobs report on currency markets has been significant. The yen weakened despite suspected interventions, the offshore yuan strengthened, and the Fed’s stance on rate cuts has influenced market sentiments and currency movements. The Bank of Japan’s efforts to prop up the yen have raised concerns among analysts, while market expectations for future rate cuts signal continued volatility and uncertainty in the currency markets.