US Dollar Weakens as Unemployment Rises—Dollar-Yen Remains Elevated in the 157 Range

(New York=Yonhap Infomax) Jin Woo Choi – The US dollar weakened as the unemployment rate in the United States climbed to its highest level in four years, fueling expectations for a potential Federal Reserve rate cut.

The dollar-yen exchange rate continued to surge above the 157 yen mark, driven by fiscal concerns stemming from Japan’s large-scale economic stimulus package.

According to Yonhap Infomax (screen number 6411), as of 09:32 AM Eastern Time on the 20th, the US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, stood at 100.054, down 0.136 points (0.136%) from the previous close of 100.190.

The dollar responded to the September employment report and weekly jobless claims released during the New York session.

The US Department of Labor announced that nonfarm payrolls increased by 119,000 in September, more than double the market consensus of 50,000.

However, the unemployment rate rose to 4.4%, exceeding the forecast of 4.3% and marking the highest level since October 2021 (4.5%). This represents a 0.1 percentage point increase from the previous month’s 4.3%.

Jake Dollarhide, CEO of Longbow Asset Management, commented, “The rise in unemployment provides the Fed with significant room to pivot toward rate cuts.”

The weekly jobless claims report showed that continuing claims for the week ending the 8th reached 1,974,000, up 28,000 from the previous week. This is the highest level since November 6, 2021, when claims stood at 2,041,000.

The Dollar Index tumbled toward the 100 mark as signs of labor market weakness coincided with a decline in US Treasury yields.

The euro-dollar exchange rate rose 0.00203 (0.176%) to 1.15465 dollars from the previous session.

The dollar-yen exchange rate climbed 0.610 yen (0.389%) to 157.573 yen.

Minoru Kihara, Japan’s Chief Cabinet Secretary, expressed concern over recent exchange rate movements, stating, “We are worried about the unilateral and rapid fluctuations.”

Nevertheless, the yen continued to weaken amid doubts over a Bank of Japan (BOJ) rate hike and fiscal concerns related to the government’s large-scale stimulus measures. Kyodo News reported that the Japanese government is considering a package worth 21.3 trillion yen (approximately 199 trillion won or $150 billion).

Joyce Chou, Head of Asia FX Research at HSBC, noted, “There are risks that the BOJ may slow the pace of rate hikes or adopt a more cautious stance.”

Rinto Maruyama, Rates and FX Strategist at SMBC Nikko, projected, “Based on past interventions, the dollar-yen rate could reach as high as 160 yen.”

Hideaki Minami, Director of the Spot FX Team at Mizuho Bank’s International FX Department, added, “Most market participants are now eyeing the 160 yen level for the dollar-yen rate.”

The dollar-yen rate extended its gains toward the end of the New York session, reaching the upper 157 yen range.

The pound-dollar exchange rate rose 0.00656 (0.503%) to 1.31152 dollars from the previous close.

The UK government is set to announce its autumn budget on the 26th, with markets closely watching for changes to income, inheritance, and property taxes, as well as the scale of spending cuts.

David Zahn, Senior Vice President and Head of European Fixed Income at Franklin Templeton, said, “The market will want to see the government secure a fiscal buffer of 20 billion pounds.”

The offshore dollar-yuan (CNH) exchange rate edged down 0.0052 yuan (0.073%) to 7.1128 yuan from the previous session.

jwchoi@yna.co.kr

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