The dollar will climb once the Federal Reserve decides to raise interest rates, which may happen as early as September due to the sustained growth of U.S. jobs, according to Bank of Tokyo-Mitsubishi UFJ Ltd.
American employers added 215,000 jobs in July, slightly lower than June’s growth of 223,000, yet still enough to hold the unemployment rate at a seven-year low of 5.3 percent, the Labor Department said in Washington on Friday.
“The bar for not raising rates is getting higher and we see no reason why today’s employment report would provide justification to not,” Derek Halpenny, the Japanese bank’s European London-based head of global market research, said in a note to investors Friday.
The latest job figures are enough to keep the markets and the Fed’s Open Market Committee thinking that a September rate increase is probable, which will support the dollar, he said.
“Last summer to this March was the first leg of a dollar bull run, which was more about monetary easing outside of the U.S. rather than yields in the U.S.,” he said. “The second leg of the dollar bull run is about to get under way and will be more about what happens with yields in the U.S.”
A gauge of the dollar has climbed about 1 percent since the end of March, after advancing about 17 percent in the previous seven months from August.
Treasury two-year note yields rose two basis points, or 0.02 percentage point, to 0.72 percent Friday, having touched 0.76 percent on Aug. 5, the highest since April 2011.