US Dollar Maintains Payroll-Driven Gains as New Zealand Dollar Rises After Election

TOKYO: The US dollar remained close to multi-month highs against major currencies on Monday after stronger than expected employment figures reinforced expectations of further monetary tightening by the Federal Reserve.

The greenback maintained most of its gains from Friday, when encouraging US labour market data triggered its biggest single-day advance in nearly six months. Meanwhile, the New Zealand dollar recovered from a seven month low following closely contested general elections that left the country’s political future uncertain.

The US dollar index, which measures the currency against six major international counterparts, stood at 102.20 in early trading, little changed from its previous close. It had advanced approximately 0.7 per cent on Friday after figures showed that employment growth accelerated in October and the unemployment rate declined.

The euro gained 0.1 per cent to $1.11485 after losing 0.7 per cent in the previous session. It had touched $1.1132, approaching a recent low of $1.1105, its weakest level since May 2025.

Against the Australian dollar, the US currency remained near a seven-month peak, although the Aussie recovered 0.3 per cent to $0.6875. The Australian currency had dropped more than one per cent on Friday, reaching $0.6855, its lowest level since March 31.

The dollar slipped 0.2 per cent against the Japanese yen to 158.185, following a 0.6 per cent increase in the previous session.

Bank of Japan Governor Kazuo Ueda said the central bank expected underlying inflation to remain around its two per cent target, while acknowledging the presence of certain upward risks.

Market expectations of a Federal Reserve rate increase have strengthened following the latest economic indicators. According to CME Group’s FedWatch tool, futures markets indicated approximately 79 per cent probability of a rate hike on December 9, compared with 71 per cent a week earlier.

Previously, expectations of tighter US monetary policy had weakened amid a sharp decline in global technology stocks. Investor concerns surrounding artificial intelligence investment, corporate profitability and the possibility of stricter regulations had contributed to uncertainty in financial markets.

Barclays strategists said political developments following the US midterm elections had placed pressure on technology-related investments, particularly because of concerns about tougher AI oversight and a potential slowdown in capital expenditure.

However, they noted that the resilience of the American economy continued to support the dollar’s attractiveness, with economic indicators remaining stronger than anticipated.

Recent remarks from Federal Reserve officials have also reinforced expectations of additional monetary tightening. New York Fed President John Williams said the US economy had demonstrated considerable resilience despite facing successive economic shocks. However, he stressed that inflation remained above the desired level and needed to return to the central bank’s two per cent objective.

St. Louis Fed President Alberto Musalem highlighted persistent inflation concerns raised by businesses in his district, while San Francisco Fed President Mary Daly indicated that additional interest rate increases could still be necessary despite the recent turbulence in technology stocks.

Elsewhere in currency markets, sterling advanced 0.1 per cent to $1.3360, while the US dollar declined 0.1 per cent against the Canadian dollar to C$1.4119. The greenback had gained 1.1 per cent against the Canadian currency on Friday after Canadian employment figures unexpectedly showed job losses.

The New Zealand dollar, meanwhile, strengthened 0.4 per cent to $0.5557, recovering from a seven-month low of $0.5529 recorded towards the end of the previous week.

The recovery followed preliminary election results indicating that Prime Minister Christopher Luxon’s National Party, along with ACT New Zealand and New Zealand First, had secured 67 seats in the 131-member Parliament. The grouping was therefore one seat above the 66 required for a governing majority.

However, the political situation remains unresolved as nearly 400,000 ballots, representing around 15 per cent of the total, are yet to be counted. Official election results are expected on November 27.

Both Luxon and Labour leader Chris Hipkins have indicated that they will wait for the final outcome before beginning formal discussions on forming a coalition government.

The uncertainty has kept investors cautious about the New Zealand currency, although its latest recovery suggests that markets are responding to the possibility of continuity in the existing governing arrangement.

Overall, movements in the foreign exchange market reflected the growing influence of US economic data and expectations surrounding the Federal Reserve’s next policy decision. Traders are likely to remain attentive to upcoming inflation figures, employment indicators and central bank commentary for further direction.