Dollar Strengthens on Jobless Claims Data
The U.S. dollar rose to its highest level in 13 months on Thursday, boosted by recent labor market data and comments from Federal Reserve officials. Investors closely analyzed the latest initial jobless claims report and the Fed’s outlook on interest rates, contributing to the dollar’s surge. Weekly jobless claims fell by 6,000 to a seasonally adjusted 213,000, marking a seven-month low, and came in below the expected 220,000. This data suggests a rebound in job growth after disruptions from hurricanes and labor strikes. However, the report also highlighted some labor market slack, as unemployment rolls grew to their highest level in three years, signaling that it is taking longer for individuals to secure new employment.
Bitcoin Continues to Climb Toward $100,000
Bitcoin extended its rally, continuing its upward trend of more than 40% since the U.S. election. The cryptocurrency reached a new record high of $99,057, before slightly retracting. It rose 4.23% to $98,458, driven by growing expectations that President-elect Donald Trump’s policies will ease the regulatory environment for cryptocurrencies. The Securities and Exchange Commission’s announcement that Chair Gary Gensler, a critic of the crypto industry, would step down in January further supported this bullish sentiment.
Federal Reserve’s Rate Outlook Influences Dollar’s Rise
Recent statements from Federal Reserve officials, including Chair Jerome Powell, have suggested a more cautious approach to rate cuts, contributing to the dollar’s rise. With inflation concerns in the U.S. and the possibility that Trump’s policies could reignite inflation, the dollar surged to 107.15, its highest level since October 4, 2023. The dollar index, which measures the greenback against a basket of other currencies, rose 0.39% to 107.03. The euro dropped 0.64%, falling to $1.0476 after hitting a 13-month low of $1.0461.
Brad Bechtel, global head of FX at Jefferies, remarked that the market seems to be overly priced on the hawkish side, especially with aggressive Fed expectations, suggesting that the dollar might be approaching overbought levels.
Rate Cut Expectations and Economic Impact
Markets have adjusted their expectations for future rate cuts, with the likelihood of a 25-basis-point reduction at the Fed’s December meeting now sitting at 55.9%, down from 72.2% a week earlier. Federal Reserve officials have shared mixed views on inflation, with some like New York Fed President John Williams anticipating a cooling inflation and further rate cuts, while others, including Richmond Fed President Tom Barkin, cautioned that the U.S. is more vulnerable to inflationary shocks than in the past.
Chicago Fed President Austan Goolsbee expressed support for further gradual rate cuts, highlighting a shift towards a more cautious monetary policy stance.
Safe-Haven Currencies React to Ukraine Conflict
Safe-haven currencies such as the Japanese yen and Swiss franc briefly strengthened in response to escalating tensions between Russia and Ukraine, though they later reversed course. The yen, which tends to gain in times of geopolitical uncertainty, saw a brief 0.98% drop against the dollar before settling at 154.56, down 0.56% for the day. Meanwhile, the Swiss franc strengthened 0.29%, reaching 0.887 after initially weakening.
Bank of Japan Governor Kazuo Ueda also made comments on Thursday, emphasizing that the central bank would closely monitor exchange rate movements when preparing its economic and price forecasts.
