Title: Dollar Stabilizes; Euro Falls as Russia Sanctions Talk Ramps Up

Apr 04, 2022 02:57AM ET

By: AnalysisWatch

The US dollar steadied on Monday after last week's strong jobs report, while the euro depreciated as talk of further sanctions against Russia over its incursion into Ukraine began.

At 3:55 a.m. EDT, the dollar index, which monitors the greenback against a basket of six other currencies, was trading marginally lower at 98.612 points.

Friday's highly anticipated U.S. jobs report for March reaffirmed the strong economy and tight labor market. The number of non-farm jobs rose by 431,000 last month, while February's figure was revised higher from 678,000 to 750,000.

In addition, the unemployment rate dropped to a new two-year low of 3.6% and wages rose, giving the Federal Reserve room to hike interest rates significantly in May.

This, however, was widely anticipated, and Fed funds futures have already priced in a very high probability of a 50 basis point rate hike next month. Bond yields responded accordingly, with two-year Treasury yields rising to nearly 2.5%.

USD/JPY gained 0.2% to 122.72, with the yen dropping again after the Japanese currency came under heavy stress in March on expectations of higher US interest rates, while Japanese rates remained anchored at low levels.

Elsewhere on the currency pairs, EUR/USD dropped 0.1% to 1.1044, weighed down by rumours of new sanctions against Moscow after Ukraine accused Russian forces of committing war crimes in the town of Buka, a claim denied by the Russian defence ministry.

Such a move would have serious economic consequences for the eurozone, to the detriment of the single currency, as Russia supplies around 40% of Europe's gas needs.

GBP/USD rose 0.2% to 1.3133, AUD/USD rose 0.2% to 0.7513 ahead of Tuesday's Australian central bank meeting, and USD/CNY was unchanged at 6.3634 as markets in mainland China were closed for a holiday.