Investing.com - The dollar rallied 1% against the yen on Friday, rising to the highest level in 13 years as a robust U.S. employment report for May underlined expectations that the Federal Reserve will start raising interest rates later this year.
The Labor Department reported that the U.S. economy added 280,000 jobs in May, ahead of economists forecast for 220,000. The unemployment rate ticked up to 5.5% from 5.4 in the previous month.
April’s payrolls report was revised to show that 221,000 jobs were created.
Hourly earnings increased 0.3% in May, after a 0.2% increase in April.
The upbeat data, particularly the pick-up in wage growth added to the view that the economy is regaining momentum after a weak first quarter. The report also bolstered expectations that the Fed could start to hike interest rates at its September policy meeting.
USD/JPY hit highs of 125.85, the most since June 2002 and was at 125.58 in late trade, 0.99% higher for the day. The pair ended the week with gains of 1.08%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.93% to 96.38 late Friday.
Comments by Japanese officials during the week indicated that Tokyo is comfortable with the weaker yen.
Speaking Tuesday Bank of Japan Governor Haruhiko Kuroda said it was important for currency rates to reflect economic fundamentals, but gave no sign that Tokyo close to undertaking any measures to stem the steep decline in the yen.
Elsewhere, the euro eased lower against the yen on Friday but still ended the week near five month highs.
EUR/JPY dipped 0.1% to 139.62 in late trade, off Thursday’s five month peaks of 141.04.
The euro was boosted by a rally in bund yields after European Central Bank President Mario Draghi said Thursday that investors should get used to higher debt market volatility.
In the week ahead, investors will be focusing on revised data on first quarter growth from Japan and the euro zone, while reports on euro zone industrial production will also be closely watched.
In the U.S., Thursdays retail sales report and Fridays report on consumer sentiment will be scrutinized for signs that the world’s largest economy is gaining momentum in the current quarter.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Tuesday as there are no relevant events on this day.
Monday, June 8
Japan is to release revised data on first quarter economic growth.
Wednesday, June 10
Japan is to publish data on core machinery orders.
Thursday, June 11
The U.S. is to release reports on initial jobless claims and retail sales.
Friday, June 12
The U.S. is to round up the week with data on producer price inflation and consumer sentiment.