The US dollar continues to strengthen its position in international markets ahead of the expected US employment data, which is to be released later today. This week, the dollar rose by 0.5% against the yen to 158.405 yen and nearly 1% against the weakened British pound, which fell to a 14-month low amid a government bond sell-off and concerns about British finances.

Dollar Index

The index demonstrates its sixth consecutive week of growth, the longest streak since an 11-week series in 2023. This is due to rising bond yields and expectations of new strong US employment data. In Asia, the index remained stable, rising 0.4% to 109.33 over the week.

The pound sterling fell 0.23% to $1.2278, touching a 14-month low of $1.2239 on Thursday. The Australian and New Zealand dollars hovered around multi-year lows, with the Australian dollar last at $0.61905, just short of breaching the 2022 low of $0.6170.

Expectations

It is expected that the US non-farm employment data will show that 160,000 jobs were added to the economy in December, in addition to 227,000 in November, with the unemployment rate remaining at 4.2%. Any stronger changes will strengthen the Federal Reserve’s position in favor of fewer rate cuts and could trigger another round of selling in the volatile bond market.

Philadelphia Federal Reserve Bank President Patrick Harker stated yesterday that he expects the US central bank to cut interest rates, but added that there is no need for an immediate reduction. Markets have reduced their expectations for US rate cuts in 2025 to about 40 basis points, while concerns about the potentially inflationary program of President-elect Donald Trump have contributed to a rise in long-term yields.

The yield on ten-year Treasury bonds rose by nearly 9 basis points this week to 4.68% and has increased by 96 basis points since mid-September. The yield on ten-year government bonds rose by 22 basis points this week to 4.805%.

Bond market turmoil

Seems to have also affected cryptocurrencies: Bitcoin fell 6% against the dollar this week to $94,066. “I am not sure many in the cryptocurrency sphere were aware of the dynamics forming in US rates/Treasuries, and many will question the factors underlying cryptocurrency movements,” said Pepperstone’s Head of Research Chris Weston.