After the release of the beautiful US non-farm report, the US dollar index rose sharply, breaking through the integer level of 104 at one point, with a daily increase of over 90 points.
It is worth mentioning that the previous time the US dollar index was above 104 was on December 13th of last year, when the Federal Reserve signaled a "dovish shift" at its final interest rate meeting in 2023. The "dot matrix" released suggested that the bank would cumulatively cut interest rates by 75 basis points in 2024, leading to a significant decline in the US dollar due to the optimistic outlook ahead of schedule.
On the contrary, there has been a clear reversal in the situation in the past two days. Firstly, in Wednesday's latest resolution, the Federal Reserve mentioned that it is not advisable to lower the interest rate target range until there is greater confidence in "inflation continuing to move towards 2%", and Chairman Powell almost wiped out the possibility of a rate cut in March.
Prior to today's trading session, the US Bureau of Labor Statistics released a stronger than expected non farm payroll report, with a quarterly increase of 353000 non farm workers in January, the highest level in nearly a year and almost twice the market expectation of 180000; The key barometer of inflation - the average hourly wage has risen by 4.5% year-on-year, the highest since February last year.
Although these optimistic data demonstrate the resilience of the labor market, it also raises questions about when the Federal Reserve can cut interest rates. According to the Federal Reserve observation tool of ChiNext, the market now believes that the probability of the bank maintaining its current interest rate level (5.25% -5.50%) after the May meeting is over 30%.
Under the influence of these factors, the yield of US treasury bond bonds rose collectively during the day, and the exchange rate of the US dollar against the G10 currency strengthened across the board, with the Norwegian krona, the Japanese yen and the New Zealand dollar leading the decline, and the Swiss franc and the euro showing the biggest decline in one month respectively. The US dollar rose nearly 1.3% against the Japanese yen, marking the largest intraday increase since December 19th last year.
Morgan Stanley's foreign exchange strategist Patrick Locke said, "The signal from employment numbers seems quite clear - as long as US job demand remains strong and wages remain strong, the US dollar will at least continue to hold its ground." He added that compared to other central banks, the Fed's interest rate path remains "more aggressive" and may help to continue supporting the US dollar.
The US dollar is expected to record a fifth consecutive week of gains, which will be the longest consecutive rise since September last year. Due to the lack of a clear interest rate hike signal from the Bank of Japan, the Japanese yen has fallen nearly 5% this year, performing the worst among G10 currencies.
Jane Foley, head of forex strategy at Rabobank, said, "The Federal Reserve's late start of easing means the US dollar will be more resilient. Therefore, even if the Bank of Japan raises interest rates in the coming months, there is still limited room for a significant rise in the yen against the US dollar."