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The dollar hit a two-year high against major currencies on Monday, with sterling seeing the biggest decline, after strong US jobs figures late last week led traders to reduce their expectations for further interest rate cuts from the Federal Reserve.
The dollar index, which tracks the U.S. currency against the yen, euro and other major currencies, rose to its highest level since November 2022.
The U.S. jobs report released Friday showed 256,000 jobs were created in December, beating consensus estimates and casting “new doubts about the need for the Fed to continue cutting rates this year.” , said Lee Hardman, MUFG senior currency strategist.
Swaps markets now expect a decline of just a quarter point this year, with some analysts even predicting the easing cycle is over.
American stocks, which sold On Friday, after the data was released, they were poised to fall again at the open on Wall Street, with futures on the S&P 500 index down 0.9 percent and those on the Nasdaq 100, focused on technology, down 1.3 percent.
Sterling fell another 0.8 percent to a 14-month low of $1.211, the worst G10 currency and continuing to rise. bruising period trading in UK assets following last week’s sell-off in government securities.
British government bonds weakened in early trading, pushing the 10-year yield up 0.05 percentage points to 4.89 percent, approaching last week’s level. a 16-year high. Government securities suffered from a sell-off in global bonds and concerns about the UK economy.
“For a concrete turnaround, we will need a commitment to cut spending or a slowdown in services inflation on Wednesday,” said William Vaughan, fixed income portfolio manager at Brandywine Global.
Stocks in the Asia-Pacific region also fell on Monday. “People are surprised by the economic strength of the United States,” said Jason Lui, head of Asia-Pacific equity and derivatives strategy at BNP Paribas. “With US interest rates so high, you will have a liquidity flight to Asia, with capital flowing to the US or staying there. »
Australia’s S&P/ASX 200 index fell 1.2 percent, while South Korea’s Kospi fell 1 percent. India’s Sensex fell 1.3 percent. Japanese markets were closed on Monday.
“Emerging market stocks generally perform better when U.S. interest rates are lower,” said Sunil Tirumalai, head of Asian equity strategy at UBS. “The Fed not cutting rates and weak currencies mean less room for rate cuts in Asia. »
Hong Kong’s Hang Seng index fell 1 percent, while mainland China’s CSI 300 index weakened 0.3 percent.
Mainland Chinese stocks have fallen steadily in recent months as hopes of a bazooka-like stimulus from Beijing fade and concerns about the economic impact of Donald Trump’s second term hit the market.
“Some of the stimulus was a positive surprise,” said Tirumalai, who acknowledged that China was still in a “bear market.” “The extension of the take-back system to a wider range of consumer goods, for example, arrived earlier than expected. »
Oil prices hit four-month high after U.S. announcement impose new sanctions on Russian oil Friday. Prices of Brent crude, the international benchmark, rose 2.3 percent to $81.65 a barrel.
