A forecast-busting surge in US jobs last month sent the dollar surging against emerging market currencies Monday while more weak trade data out of China compounded fears about the struggling Asian economic giant.
However, Shanghai was at an 11-week high on news China will restart initial public offerings this month, indicating authorities are becoming more confident in the market after a summer rout that wiped trillions off valuations.
And Japan’s Nikkei rallied almost two percent – adding to a three-day winning run that has seen it hit a two-month high – as the yen retreated against the dollar.
The chances of the Federal Reserve hiking US interest rates shot up after Friday’s employment report, fuelling worries of a flight of capital from Asia to the United States as well as a higher borrowing costs strangling investment.
The US Labor Department said the world’s biggest economy created 271,000 net new jobs in October, almost twice as many as September, while the unemployment rate fell to a seven-and-a-half year low of 5.0 percent.
The figure easily outstripped expectations and tempered fears that a slowdown in the world economy, particularly in China, had spread to the United States.
Investors immediately jumped on the figures to bet on a Fed rate hike next month. Talk of the so-called lift-off by the US central bank had been tempered in recent months following a string of weak data from Washington and in light of China’s ongoing malaise.
But Shane Oliver, Sydney-based strategist at AMP Capital Investor, said the latest report “supports the case for a December Fed rate hike”.
Fed chief Janet Yellen earlier this year said she expected a rise before 2016, albeit incremental, as the US economy get back on track.
And Oliver told Bloomberg News: “The Fed is unlikely to do anything to threaten global growth and this in turn should help see the global economic recovery continue.”
China IPOs give lift
The news sent the dollar surging in New York on Friday, hitting 123.16 yen against 121.66 earlier in the day in Asia, while the euro plunged to a six-month low $1.0707 from $1.0886.
On Monday in Asia it was at 123.42 yen while the single currency was up at $1.0747.
The weaker yen helped Japanese exporters, pushing the Nikkei index up more than two percent by lunch.
And against emerging currencies the greenback rallied on expectations dealers will shift their investment focus out of developing countries, with Indonesia’s rupiah, Malaysia’s ringgit and South Korea’s won particularly hurt.
The won sank one percent, the rupiah lost 0.8 percent and the ringgit was 1.2 percent down.
“The strong dollar is central in this move today as the non-farm payrolls was very strong,? said Nizam Idris, head of currencies and fixed-income strategy at Macquarie Bank in Singapore. “China news was poor and that didn?t help.”
China on Sunday reported imports fell almost a fifth in October from a year ago, underlining battered domestic demand in the planet’s biggest trader in goods and a key driver of world growth. Exports also continued to fall as foreign demand languished.
But the disappointment was overshadowed by China’s announcement late last week that it will resume new share listings, having suspending them in July in the face of a rout that sent mainland markets down more than 40 percent.
While dealers usually fear IPOs because they often drain funds away from the market, the announcement indicates leaders are confident a slew of support measures are having the desired effect.
But Robbert van Batenburg, director of market strategy at Societe Generale SA, said: “It’s a bit of make-believe effort for China to give an impression that we are in a more normalised situation after what happened in August.
Shanghai’s stock market was up 1.7 percent while Hong Kong was marginally higher. But Sydney, where several firms with links to China are listed, was 1.5 lower on the trade figures.
Key figures around 0250 GMT
Tokyo – Nikkei: UP 2.1 percent at 19,678.39 (break)
Shanghai – composite: UP 1.7 percent at 3,650.67
Sydney – S&P/ASX200: DOWN 1.5 percent at 5134.8
Won/USD: DOWN 0.9 percent at 1,152.61
Ringgit/USD: DOWN 1.0 percent at 4.3550