London - The dollar resumed its advance against the yen as traders judged that the Federal Reserve remains on track to raise interest rates this year, despite Friday’s below-forecast payrolls data.
While gains in hiring slowed for a third month in September, the share of working-age people in the labor force climbed to a six-month high and wage growth picked up. The result: futures prices signaled a slightly increased probability of a rate hike by December, at 64% at the end of last week.
The October 7 drop in the dollar-yen rate snapped its longest winning run since July 2014 and was also spurred by demand for the Japanese currency as a haven after the flash crash in the pound.
Monday’s recovery came amid limited trading flows, with markets closed for holidays in Japan and Treasuries dealing halted for the US’s Columbus Day.
“It looks like the dollar is setting itself up for a period of consolidation for the first half of this week as markets digest Friday’s employment report,” said Ned Rumpeltin, European head of currency strategy at Toronto-Dominion Bank in London. “The data keeps the Fed on track for a December move, but that’s not a slam-dunk decision at this point.”
A key focus this week will be Fed chair Janet Yellen’s speech in Boston on October 14, which traders will watch for clues on how policy makers view the economy, Rumpeltin said. The minutes of the US central bank’s September meeting are due on Wednesday, while a report this week is forecast to show a recovery in retail sales.
The dollar climbed 0.4% to ¥103.41 as of 15:55. The greenback fell 0.9% on October 7, snapping eight days of gains.
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