Dollar climbs to two-month peak as Fed hike bets ramp up

The U.S. dollar has reached a two-month high following a strong U.S. jobs report, which has increased expectations for a Federal Reserve rate hike in December. Key points include: 1) The euro, Australian dollar, and New Zealand dollar fell against the dollar, reaching two-month lows. 2) The Japanese yen is under pressure, trading at 160.29 per dollar, with potential interventions expected as the Bank of Japan lags behind other central banks. 3) Markets now see over a 70% chance of a rate hike in December, up from 45% a week ago. 4) In cryptocurrencies, Bitcoin has rebounded slightly after significant losses, while Ether also rose.

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Summary
Euro, Aussie and kiwi struggle at two-month lows against stronger dollar
Yen falls deeper into intervention territory; more jawboning expected
Traders pricing in more than 70% chance of Fed hike in December

SINGAPORE, June 8 (Reuters) - The dollar was perched near a two-month high on Monday after a blowout U.S. jobs report sent traders ramping up bets on a Federal Reserve rate ‌hike this year, while the yen teetered further into the intervention zone.

Early moves in currencies were largely muted with markets in Australia closed for a holiday, though the dollar held to its strong gains made in the wake of the report which showed nonfarm payrolls increased by 172,000 jobs last month, far exceeding estimates.

Against the dollar, the euro fell to a two-month low of $1.1507, while sterling struggled at a three-week trough of $1.33165.

The Australian and New Zealand dollars similarly slid to their lowest in two months at $0.7016 and $0.5779, ⁠respectively.

"The U.S. payrolls report released... paints a picture of a U.S. labour market that is strengthening despite the ongoing energy price shock," said Jonas Goltermann, chief markets economist at Capital Economics.

"That combination makes policy tightening by the Fed later this year increasingly probable... we now expect the FOMC to deliver two 25-basis-point rate hikes later this year, in response to the energy supply shock and the re-acceleration of the U.S. labour market."

Prior to the release of the jobs report, traders had been gradually adding to bets on a Fed hike this year, as the global energy crisis tied to the Iran war threatens to stoke inflation.

U.S. President Donald Trump said on Sunday he would tell Israeli Prime Minister Benjamin Netanyahu not to strike back after Iran fired a salvo of missiles at Israeli targets in retaliation for an attack on ‌the outskirts ⁠of Beirut, news outlet Axios reported.

Markets are now pricing in a more than 70% chance that the Fed will raise rates in December, sharply up from a 45% probability a week ago, according to the CME FedWatch tool.

YEN ON TENTERHOOKS

The strength in the dollar has in turn spelled more pain for the yen, which fetched 160.29 per dollar .

The Japanese currency has now erased its gains made in the wake of Tokyo's 11.7 trillion yen ($73.01 billion) intervention just ⁠over a month ago, when it slid to its lowest since July 2024 at 160.725.

"The yen remains under pressure due to the persistent interest rate disadvantage, with the Bank of Japan still slow to normalise policy despite hawkish shifts at other central banks," said David Meier, an economist at Julius Baer.

"While ⁠the interventions have bought the authorities some time, the outlook hinges largely on monetary policy action."

Sources told Reuters that the BOJ is expected to raise interest rates this month unless a sharp escalation in the Middle East conflict upends markets.

In cryptocurrencies, bitcoin was up more than 1% ⁠to $62,838.60, rebounding after sliding to its lowest since October 2024 last week.

Ether rose more than 3% to $1,680.87, having also slid to a 14-month low last week.

Booming AI stocks and a series of glittering upcoming new listings such as SpaceX have lured capital away from bitcoin, leaving the world's largest cryptocurrency struggling since the start of the year.

($1 = 160.2500 yen)

Reporting by Rae Wee Editing by Shri Navaratnam

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Dollar climbs to two-month peak as Fed hike bets ramp up

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