Dollar stands tall after U.S. jobs report backs Fed tightening plans
The dollar was on solid footing in early Asian trading on Monday, after a bigger-than-expected increase in U.S. jobs suggested the Federal Reserve would stick with its tightening plans for the rest of this year.
U.S. job growth surged more than expected in June and employers increased hours for workers, suggesting the Fed could stick to its plan for its third interest rate hike this year and begin to reduce its balance sheet despite sluggish wage gains and tepid inflation.
Against the yen, the dollar was 0.1 percent higher at 113.98
"The solid jobs report gives us more reason to expect the Fed to announce that it's prepared to start trimming its balance sheet," said Mitsuo Imaizumi, Tokyo-based chief foreign exchange strategist for Daiwa Securities.
"By contrast, the Bank of Japan is nowhere near a policy exit, and it's taking steps that weaken the yen," he said.
On Friday, the BOJ sought to keep Japanese government bond yields near its policy target, embarking on a special market operation as well as increasing the size of its regular JGB purchase operations.
Recent positioning data showed that some investors pared their long dollar positions ahead of the jobs report, amid concerns that a spate of lackluster data would prompt the Fed to alter its hawkish plans.
Speculators this week slashed net long bets on the U.S. dollar to their lowest since mid-May 2016 in the week ended July 4, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. [IMM/FX]
The value of the dollar's net long position dropped to $135 million, from net longs of $4.5 billion the previous week. The latest week marked the first time since mid-April 2016 that net long dollar positioning fell to under $1 billion.
Higher U.S. Treasury yields underpinned the dollar. The benchmark 10-year U.S. yield (US10YT=RR) stood at 2.389 percent in Asian trading, not far from its U.S. close of 2.393 percent on Friday, when it touched a more than eight-week high of 2.398 percent after the jobs report.
The euro edged down 0.1 percent to $1.1400