LONDON — The dollar tumbled to its lowest in almost a month against the yen yesterday, as investors caught out by Friday’s soft US jobs data reassessed how quickly the Federal Reserve might scale back its stimulus.
The dollar slid 0,8% to 103,30 yen, having fallen to 103,26 at one point, its lowest level since December 18.
The greenback’s losses accelerated after it breached Friday’s intraday low of 103,83 yen.
Dollar/yen was the strongest-performing major currency pair last year and many hedge funds have been betting the trend will continue as the Fed cuts back its huge bond-buying program and on expectations the Bank of Japan will provide even more stimulus this year.
But many traders were taken by surprise by the US non-farm payrolls data, which showed a rise of 74 000, well short of the 196 000 analysts had expected.
Yields on 10-year US Treasuries, which were above 3% in the middle of last week, have fallen to just above 2,85%, their lowest since mid-December, lending less support to the dollar.
The implied yields on Fed funds futures also tumbled as markets pushed back the timing of the first interest rate hike out towards late-2015 from mid-2015.
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Investors were also looking for direction with Japanese financial markets closed yesterday for a public holiday.
“The market is taking its leads from US Treasury markets, which are generally weighing on the dollar across the board,” said Adam Cole, global head of FX strategy at RBC Capital Markets.
“One of the strongest consensus views was that the dollar would outperform. Markets didn’t have a (jobs) number like that on the radar at all.”
He said he expects the dollar to soften against the yen this quarter. “With Tokyo players away today, the sense I get is that the market may be hunting for any stops left by people in Tokyo,” said a trader for a Japanese bank in Singapore, referring to stop-loss dollar offers.
The yen also pushed higher versus the euro, which fell 0,7% to 141,26 yen. The euro touched a low of 141,24 yen, its lowest level in nearly a month.
The euro was up marginally against the dollar at $1,3672, staying above a one-month trough of $1,3548 hit on Thursday.
Volumes were higher in the Australian dollar, which hit a one-month high of $0,9047 and was last at $0,9039, up 0,5%.
The Aussie has weakened against the US dollar in recent months after comments by central bank governor Glenn Stevens that he would prefer to see the local dollar lower as a boost to trade-exposed sectors of the economy.
The Canadian dollar headed back towards its lowest in more than four years against the greenback after data showed the country unexpectedly shed jobs last month.
The loonie, which fell in every session last week against its US peer, last stood at C$1,0904 per dollar. The US dollar had scaled a peak of C$1,0946 on Friday, the greenback’s strongest level since October 2009.