The greenback subsided further in Monday's Asian session trading (5/December). Non-farm Payroll data on Friday outperformed the consensus estimates.

However, the United States dollar exchange rate remained under pressure due to a pullback in US Treasury bond yields. The USD index or known as DXY then fell further into the 104.20s this morning.

It was also setting a low record since June 28. The America's Non-farm Payroll report posted an increase of 263k in the November 2022 period, better than the consensus estimate of only 200k. 

The data of the previous period was also revised up from 261k to 284k. Meanwhile, the unemployment rate stagnated at 6.7 percent based on the data released. 

Factors that Driving Inflation Remain Strong

The average hourly income reached 5.1 percent for year-on-Year period. The data suggests that a number of factors driving inflation in terms of employment remain strong.

Those are including salary growth and labor demand. In fact, the Fed needs a "cooling" of the labor market in order to return the inflation rate to its 2 percent target. 

Taking into account the gap, markets are increasingly confident that the Fed will only slow and not stop the pace of its rate hikes as early as next year. However, the same data was unable to push up the interest rate expectations again.

Just days earlier, Fed Chairman Jerome Powell had confirmed the need for a "rate hike" slowdown in the near future. These considerations blunted the positive impact of the release of Non-farm Payroll data for the USD. 

USD/JPY Pair Slumped and Reached the Lowest Level

On the other hand, many other factors weighed on it. These are including the decline in United States Treasury bond yields and the improvement in market sentiment. 

America's Treasury 10Y bond yields closed up to 3.535% at the end of Friday's New York session. However, these were still locked in their lowest range since September. 

This resulted in the USD/JPY mired sharply to the lowest level since August in the 134.00s range. The world's mass media yesterday morning reported that several cities in China have relaxed anti-COVID-19 restrictions.

That was reviving speculation surrounding the revision of the Zero COVID policy. Market sentiment is improving, restoring the value of financial assets that are closely related to China. 

USD/CNY Fell Nearly one Percent 

Elsewhere, the USD/CNY plunged nearly 1 percent to the 6.9520s, while AUD/USD rallied more than 0.5 percent to the 0.6850s. Some changes can also be seen on other currencies.

The US dollar index closed the month of November with its worst performance since 2010. Then it started trading in the Asian session on Thursday (1/December) with a gap down in the 105.70s. 

The reason is that Fed Chairman Jerome Powell's speech reinforced the America's central bank's intention to slow the pace of its rate hikes. It will be started at this month's FOMC meeting.

Jerome Powell explained how strong the efforts to fight inflation are far from over. The central bank also doesn't yet know how much interest rates will eventually need to rise. 

50 BP Rate Hike is Hoped by the Market

However, he also stated that Their parties think slowing down (rate hikes) at this point is a good way to balance risk. Powell's remarks immediately lowered the Fed's interest rate expectations. 

The market now expects federal reserve interest rate to peak at 4.95% as of May 2023. It was previously expected to reach 5.06 percent by June 2023. 

Meanwhile, markets are increasingly confident that the Fed will raise their rates by just 50 basis points at the upcoming FOMC meeting. The greenback was also weighed down.

It is especially by the publication of an employment report from ADP last night that showed additional jobs in the November period missed expectations. This is a negative sign for tomorrow's release of NfP data.