Dollar hits 2-year high after robust US data puts brake on rate cut bets

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The dollar hit a two-year high against major currencies on Monday after strong U.S. jobs data late last week prompted traders to cut expectations of further interest rate cuts by the Federal Reserve.

The dollar index, which tracks the U.S. currency against the yen, euro and other major currencies, hit its highest level since November 2022, with the pound falling 0.5 percent to $1.216, a new 14-month low.

Shares in China, India, South Korea and Australia also fell on Monday after Friday’s U.S. payrolls report showed 256,000 jobs were added in December, undermining earlier consensus estimates and raising fears that a strong economy could slow Pace of Fed rate cuts.

“People are surprised by the strength of the U.S. economy,” said Jason Lui, head of Asia-Pacific equity and derivatives strategy at BNP Paribas. “.

Australia’s S&P/ASX 200 fell 1.2 percent, while South Korea’s Kospi fell 0.8 percent.Japanese markets were closed on Monday.

“Emerging market stocks traditionally do better when US interest rates are lower,” said Sunil Tirumalai, head of Asia equity strategy at UBS.

Hong Kong’s Hang Seng index fell 1.2 percent, while mainland China’s CSI 300 shed 0.5 percent.

“Land [Chinese] the market is still more resilient to external noise,” said Lui, who said mainland investors were still shifting funds from low-yielding savings accounts to the stock market.

However, mainland Chinese shares have steadily fallen 17 percent since a peak on Oct. 8 last year, as hopes of a bazooka-style stimulus from Beijing faded and concerns about the economic impact of Donald Trump’s second term hit the market.

“Some of the stimulus measures were a positive surprise,” said Tirumalai, who acknowledged that China was still in a “bear market.”

Oil prices rose to a four-month high after the US announcement imposition of new sanctions on Russian oil on Friday.

International benchmark Brent crude oil prices rose 1.6 percent to $81 a barrel, while U.S. West Texas Intermediate crude rose 1.7 percent to $77.90 a barrel.