Dollar Climbs to One-Month High in Yen Exchange Rate – Growth Boost from US Labor Market Sufficient for Now

The dollar received positive momentum on Thursday, reaching a one-month high against the yen. This movement is supported by the current strength of the US labor market, suggesting that the Federal Reserve does not see a rushed need for action regarding rate cuts. Japan's new political leadership, on the other hand, is currently not pursuing further interest rate hikes, which subjected the yen to a wave of selling pressure on Wednesday. The decision followed a meeting between the Prime Minister and the Governor of the Central Bank. The euro also failed to recover from recent lows reached in the previous session. Isabel Schnabel, a representative of the European Central Bank known for her typically hawkish stance, showed unexpectedly calm inflationary views, reinforcing expectations of a rate change. A geopolitical aspect came into play on Wednesday when Iran fired around 180 rockets at Israel. These tensions increased demand for the US currency, considered safe, and sparked fears of a full-scale war. The Dollar Index, which measures the currency against the euro, yen, and four other major competitors, rose to 101.70, marking a three-week high. The ADP employment report shows that private US payrolls grew by 143,000 jobs last month, fueling strong expectations for the monthly non-farm payroll report. The market now sees a 34.6% probability that the US will cut rates by another 50 basis points. An assessment, which compared to the previous week has greatly declined, still seems excessively high, according to Ray Attrill, head of foreign exchange strategy at National Australia Bank. Attrill believes that an overall positive payroll report on Friday evening could significantly reduce the likelihood of a 50 basis point cut. The dollar rose by 0.09% to 146.575 yen after previously reaching 146.885, a level last seen on September 3. Asahi Noguchi of the Bank of Japan, who opposed the rate increase in July, is set to give a speech later in the day. The euro was little changed at $1.10455, near the week's low of $1.10325. Riskier currencies were initially influenced by the geopolitical events on Wednesday, but the markets calmed with the absence of immediate retaliation by Israel.