Dollar bounces back on lower US jobless claims

The USDJPY pair bounced back from the intraday low of 156.43 in the North American session on Thursday.

The dollar posted a fresh two-year high, with the DXY Dollar Index rising above 108.80, as U.S. Initial Jobless Claims for the week ending December 27 came in lower-than-projected.

The Department of Labour reported that individuals claiming jobless benefits for the first time were 211,000, lower than estimates of 222,000 and the former release of 220,000, upwardly revised from 216,000.

The greenback was already performing strongly on expectations that the Federal Reserve will reduce interest rates gradually this year.

The pace of interest rate cuts by the Fed in 2024 was slightly aggressive as policymakers were focused on improving labour market conditions than lowering price pressures. In the process, the Fed reduced its key borrowing rates by 100 basis points (bps) in the last three monetary policy meetings.

For this year, Fed officials have guided fewer interest rate cuts as they are upbeat on the US economic outlook. The latest dot-plot showed that policymakers collectively see Federal Funds rate heading to 3.9% by the year-end.

Meanwhile, the Japanese Yen performs strongly against its major peers on Thursday amid worries that Japanese administration could intervene in the FX domain against excessive foreign exchange moves.

Japan Finance Minister Katsunobu Kato said last week that authorities are watching FX moves closely and will act to stabilise faltering Yen.

(Source: OANDA)