The US dollar weakened on Friday after US labor data for last month showed slower wage growth, suggesting that an easing of inflation pressures might keep the US Federal Reserve’s pace of interest rate hikes modest and thereby reduce the greenback’s appeal.
The US economy last month added jobs at a brisk pace, but slower wage growth and a rise in the unemployment rate prompted financial markets to dial back expectations of a 50 basis point rate hike when Fed policymakers meet in two weeks.
Congressional testimony earlier in the week by Fed Chairman Jerome Powell was seen as hawkish and strengthened the US dollar as US Treasuries pay more in yield than other government debt.
Photo: Reuters
The US dollar slid against all major currencies, but was essentially flat against the Canadian dollar. The US dollar index, a basket of trading currencies, fell 0.64 percent to 104.64, but rose 0.11 percent from a week earlier.
Adding to the plunge in Treasury yields was the closing of SVB Financial Group, the largest bank failure since the financial crisis, as California regulators moved quickly to protect depositors at the lender.
The yield on benchmark 10-year Treasury notes fell more than 22 basis points to below 3.7 percent in the biggest single-day drop in four months. Bond yields move opposite to their price.
“There is a significant, in my opinion anyway, safe-haven bid going on,” WisdomTree head of fixed income Kevin Flanagan said. “There are concerns about potential banking stress.”
Average hourly earnings for all private workers rose 0.2 percent versus 0.3 percent in January, and lifted the year-on-year figure to 4.6 percent. Economists expected hourly earnings to rise 0.3 percent last month, which would have raised wages by 4.7 percent annually.
The US dollar might be range-bound as slowing inflation to the Fed’s target of 2 percent is likely to be bumpy, said Joe Manimbo, senior market analyst at Convera in Washington.
“When the market revises up expectations for peak rates, we see the dollar take two steps up, but once the dust settles, we see the dollar take a step back,” Manimbo said. “The market already anticipates that the Fed is going to pause this year, but exactly when it’s just unknown.”
The New Taiwan dollar shrank against the US dollar on Friday, losing NT$0.038 to close at NT$30.848, down 0.72 percent from NT$30.627 a week earlier.
The Japanese yen rose 1.15 percent to ￥135 per US dollar.
The US dollar earlier jumped against the yen in a knee-jerk move after the Bank of Japan (BOJ) kept policy unchanged in BOJ Governor Haruhiko Kuroda’s last policy meeting before he steps down in April.
While the decision was expected by most market watchers, many see the days of the BOJ’s bond yield curve control as numbered, which led to some pricing in a slim chance of a policy tweak at Kuroda’s last policy meeting.
Additional reporting by CNA, with staff writer
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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