Most Asian markets rose yesterday while the dollar clawed back some of its hefty losses after last week’s soft US jobs report reduced the chances of an imminent interest rate rise, but the stronger yen hit Japanese exporters.
The US Labor Department said on Friday that May saw the world’s top economy create the fewest number of jobs in six years, slashing expectations borrowing costs will rise any time soon.
Traders who had been expecting the Fed to announce a rise no later than July - with the central bank having hinted at such just last month - were caught off guard.
The dollar was sent plunging 2% against both the yen and the euro on Friday but made some minor headway in afternoon trading yesterday.
The greenback edged up to ¥107.13 from ¥106.63 in New York but was still sharply down from levels above ¥109 before the jobs report.
The euro dipped to $1.1357 from $1.1364 but was well up from the $1.1154 reached on Thursday. “The slowdown in job growth in recent months must have put paid to any chance of a hike in interest rates by the Fed at its mid-June meeting,” said Richard Jerram, chief economist at Bank of Singapore.
“A July rate hike is still possible but it would require a very strong June jobs report, reversing much of the slowdown of recent months.
If the June report is inconclusive then the Fed might find it sensible to wait until its mid-September meeting.”
The yen’s rise hit Japan’s exporters, although afternoon buying pared early losses.
The Nikkei closed 0.4% down, having sunk more than 1% in the morning. Shanghai ended 0.2% lower while Hong Kong added 0.4% and Sydney was 0.8% higher. The prospect that US borrowing costs will remain low for some time provided support to emerging markets, with Manila, Jakarta and Bangkok well up.
Higher-yielding, or riskier, currencies also gained. South Korea’s won added 1.4% against the dollar, Indonesia’s rupiah jumped 1.5% and the Malaysian ringgit climbed 1%.
However, the greenback rallied against the British pound after opinion polls at the weekend showed more people saying they will vote to leave the European Union in this month’s referendum.
Separate surveys by the Observer and ITV had the Brexit camp picking up momentum ahead of the June 23 poll.
The pound was at $1.4400 from $1.4515 on Friday in New York. There is widespread expectation that a break from the 28-country union would spur significant market turmoil and slow or stall the British economy.
The dollar’s broad weakness supported oil prices, which held around the $50 mark despite Opec’s decision last week not to make any production cuts.
Brent was up 1.2% at $50.22 and West Texas Intermediate also gained 1.2% to $49.19.
In early European trade, London added 0.4%, Frankfurt was flat and Paris fell 0.3%.
In Tokyo, the Nikkei 225 down 0.4% at 16,580.03 points; Shanghai - Composite down 0.2% at 2,934.10 points and Hong Kong - Hang Seng up 0.4% at 21,030.22 points at the close yesterday.