The dollar held near a two-month high on Monday after a strong U.S. jobs report boosted investors' bets that the Federal Reserve will raise interest rates this year, while the yen weakened further into intervention territory.
Currency movements were largely limited compared to the broader market, as a sharp sell-off swept through technology stocks in Asia. The dollar held onto the strong gains it made following the report showing a better-than-expected increase of 172,000 non-farm payroll jobs last month.
The euro fell against the dollar to its lowest level in two months, reaching $1.1507, while the British pound hit a three-week low of $1.33165, according to Reuters data.
The Australian dollar and the New Zealand dollar similarly fell to their lowest levels in two months at $0.7016 and $0.5779 respectively.
Jonas Gaultermann, senior market analyst at Capital Economics, said the US jobs report presents a picture of an improving US labor market despite the current energy price shock.
This situation makes a tightening of monetary policy by the Federal Reserve (the US central bank) later this year increasingly likely... We now expect the Federal Open Market Committee to raise interest rates twice by 25 basis points later this year, in response to the energy supply shock and the US labor market's return to acceleration.
Israel said it bombed military targets in western and central Iran on Monday, even after reports that U.S. President Donald Trump had asked Israeli Prime Minister Benjamin Netanyahu to refrain from launching further attacks.
According to the CME Group's FedWatch tool, markets now expect a greater than 70 percent probability that the Federal Reserve will raise interest rates in December, a sharp increase from a 45 percent probability a week ago.
The rise in the dollar in turn led to a further decline in the yen, which reached 160.33 per dollar.
The yen erased the gains it made after Tokyo intervened by injecting 11.7 trillion yen ($73.01 billion) just over a month ago, when it fell to its lowest level since July 2024 at 160.725 to the dollar.
Sources told Reuters that the Bank of Japan is expected to raise interest rates this month unless there is a sharp escalation in the Middle East conflict that destabilizes markets, as rising fuel prices resulting from the energy crisis exacerbate price pressures on the economy.
As for cryptocurrencies, Bitcoin rose by more than one percent to $62,615.25, recovering after falling to its lowest level since October 2024 last week.
The price of Ether also rose by more than one percent to $1,652.23, after falling to its lowest level in 14 months last week.
