The US dollar on Monday traded near at a seven-year peak against the yen and a two-year high against the euro after Japan threw a surprise last week over widening its stimulus and speculation that rate of interest in the United States could be hiked sooner than later.
The greenback was recorded at USD 112.74, which was its highest since December 2007, at the late-morning trade in Singapore in comparison to USD 112.35 yen in New York late Friday.
The euro was trading at USD 1.2476 against USD 1.2525, while it also bought 140.68 yen against 140.71 yen. Meanwhile, the markets in Japan were closed for a public holiday.
While talking about the dominant influence on markets, the United Overseas Bank (UOB) of Singapore said that it was mainly due to the surprise announcement made by the Bank of Japan on Friday about the further expansion of its vast asset-purchasing scheme in an attempt to kickstart the country’s economy.
The Japanese central bank’s policymakers said that they will be adding up to 20 trillion yen to the scheme, making it 80 trillion yen annually.
The decision by the Bank of Japan comes in the light of a series of poor data that has mounted the fears of further contraction of the world’s third largest economy. The Japanese economy has contracted in April-June this year and the economists fear of further contraction in the following three months, technically leading it to the recession.
According to UOB, as far as the US economy is considered, the dealers are more focused on its jobs data that is scheduled to be released on Friday.
“The US jobs data could swing market expectations for the Federal Reserve’s future course of interest rate actions,” Singapore’s central bank said.
In a policy statement last week, the Federal Reserve Bank has said that it would maintain near-zero interest rates for “a considerable period of time”, continuing with its timetable of a rise well in next year. It also announced the end of its quantitative easing programme.
Talking about the US labor market, UOB said the country’s unemployment rate is likely to remain unchanged at 5.9 percent in October and the non-farm payrolls data is expected to show a surge of 215,000 jobs last month as compared to September’s 236,000 jobs.