By Rae Wee and Ankur Banerjee
SINGAPORE (Reuters) -The dollar began the week on a strong note on Monday, leaving its peers languishing near multi-year lows after a blowout U.S. jobs report that underlined the outperformance of the world’s largest economy versus the rest of the world.
The U.S. dollar rose 0.2% to 109.88 against a basket of currencies, hovering near its strongest since November 2022.
The euro fell 0.3% to $1.0216, languishing near Friday’s low of $1.0212, its weakest level since November 2022.
Sterling slid to a 14-month low of $1.2138, further pressured by concerns at home over rising borrowing costs and growing unease over Britain’s finances.
Moves in the Chinese yuan also stole the spotlight in the Asian session, which saw thinned trading due to a holiday in Japan.
China on Monday stepped up efforts to defend the weakening currency by relaxing rules to allow more offshore borrowing and sending verbal warnings.
The onshore yuan rose marginally in the wake of the announcements and was last at 7.3318 per dollar, still languishing near a 16-month low.
Gains in the offshore yuan were more pronounced as it rose more than 0.15%. It last stood at 7.3574 per dollar.
“The outlook for the RMB is very tricky, both because of the domestic issues as well as the external risk. So domestically, I think what would help is if we get more clear signs of fiscal stimulus and that could kind of spur growth because we’ve been seeing capital outflows again,” said Joey Chew, head of Asia FX research at HSBC.
Separately, China’s export growth picked up steam in December while imports recovered, data on Monday showed.
Still, markets hardly reacted to the better-than-expected figures, as worries grow over the outlook for Chinese trade on the back of U.S. President-elect Donald Trump’s impending return to the White House.
The Australian dollar last traded 0.05% lower at $0.6144, languishing near its weakest level in over four years hit on Friday. China is Australia’s largest trading partner.
The New Zealand dollar remained pinned near an over two-year trough at $0.5559.
U.S. RESILIENCE
In the broader market, other major currencies were still reeling from the aftermath of the blockbuster U.S. jobs report.
Friday’s data showed U.S. job growth unexpectedly accelerated in December while the unemployment rate fell to 4.1% as the labour market ended the year on a solid footing, leaving traders heavily scaling back bets of Federal Reserve rate cuts this year.
“This latest round of data underlines the fact that U.S. economic exceptionalism remains a key market theme to start 2025,” said Nick Rees, head of macro research at Monex Europe.
“The U.S. labour market has stabilised but is not continuing to unwind, and that combined with upside inflation risks stemming from the new (Donald) Trump administration … should support an extended pause to easing by the FOMC.”
Markets are now pricing in just 27 basis points worth of Fed rate cuts this year, down from roughly 50 bps at the start of the year.
Adding to expectations of a less aggressive easing cycle is the view that Trump’s plans for hefty import tariffs, tax cuts and immigration restrictions could stoke inflation. He returns to the White House in a week.
Ahead of that, data on U.S. inflation is due on Wednesday, where any upside surprise could threaten to close the door on easing altogether. A slew of Fed officials are also due to speak this week.
Against the dollar, the yen meanwhile rose 0.13% to 157.51. The yen’s decline was mitigated by news that Bank of Japan policymakers could raise their inflation forecast at a policy meeting this month as a prelude to hiking rates again.
(Reporting by Rae Wee and Ankur Banerjee; Editing by Jacqueline Wong and Kim Coghill)
