BY COMFORT OGBONNA
The dollar started the week strong on Monday, leaving other major currencies near multi-year lows after a robust U.S. jobs report highlighted the superior performance of the world’s largest economy compared to other nations.
The U.S. dollar rose 0.2% to 109.88 against a basket of currencies, hovering close to its highest level since November 2022.
The euro dropped 0.3% to $1.0216, just above Friday’s low of $1.0212, marking its weakest point since November 2022.
The British pound slid to a 14-month low of $1.2138, weighed down by domestic concerns over rising borrowing costs and growing unease about the country’s fiscal health.
In the Asian session, the Chinese yuan drew attention amid reduced trading due to a holiday in Japan. On Monday, China took steps to support its weakening currency by easing restrictions on offshore borrowing and issuing verbal warnings. The onshore yuan saw marginal gains after these measures, last trading at 7.3318 per dollar, though it remained near a 16-month low.
The offshore yuan performed better, rising over 0.15% to 7.3574 per dollar.
“The outlook for the RMB is very challenging due to domestic issues and external risks. Domestically, more definitive signs of fiscal stimulus would help spur growth, especially as we’re seeing capital outflows again,” said Joey Chew, head of Asia FX research at HSBC.
Separately, data on Monday showed China’s export growth accelerated in December while imports recovered. However, markets largely shrugged off the positive numbers, with concerns mounting over the future of Chinese trade amid President-elect Donald Trump’s upcoming return to the White House.
The Australian dollar fell 0.05% to $0.6144, hovering near its weakest level in more than four years, which it hit on Friday. China, Australia’s largest trading partner, remains a key factor.
The New Zealand dollar stayed near a two-year low at $0.5559.
In the broader currency market, other major currencies continued to feel the impact of Friday’s strong U.S. jobs report. December’s data showed unexpected acceleration in U.S. job growth, with the unemployment rate dropping to 4.1%. This prompted traders to reduce expectations for Federal Reserve rate cuts this year.
“This data reinforces the narrative of U.S. economic exceptionalism as a dominant market theme in early 2025,” said Nick Rees, head of macro research at Monex Europe.
“The U.S. labor market has stabilized without significant deterioration, and combined with inflation risks tied to the new Trump administration, it’s likely the Federal Reserve will maintain its pause on rate cuts.”
Markets are now pricing in just 27 basis points of Fed rate cuts this year, down from about 50 basis points at the start of the year. Expectations for less aggressive rate cuts are also fueled by Trump’s planned policies, including import tariffs, tax cuts, and stricter immigration measures, which could drive inflation. Trump is set to return to the White House in a week.
Before that, U.S. inflation data due on Wednesday could further shape market expectations. An unexpected rise in inflation could eliminate the possibility of rate cuts altogether. Several Federal Reserve officials are also scheduled to speak this week.
Meanwhile, the yen rose 0.13% to 157.51 against the dollar. Its recent decline was tempered by reports that Bank of Japan policymakers may raise their inflation forecast at an upcoming policy meeting, signaling the potential for another rate hike.
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