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

The dollar index, which tracks the US currency against the yen, euro and other major currencies, reached its highest level since November 2022, with the pound falling 0.5 percent to $1.216 – a new 14 months down.

Equities in China, India, South Korea and Australia also fell on Monday after the US payrolls report on Friday showed 256,000 jobs were added in December, blowing past consensus estimates and raising concerns that a strong economy will slow the Fed’s rate of reduction.

“People are surprised by the strength of the US economy,” said Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas. “With high interest rates in the US you have an outflow of liquidity to Asia, with capital flowing to the US or staying there.”

Australia’s S&P/ASX 200 index fell 1.2 percent, while South Korea’s Kospi fell 1.1 percent. India’s Sensex fell 0.8 percent. Japanese markets were closed on Monday.

“Emerging market equities traditionally perform better when US interest rates are lower,” said Sunil Tirumalai, head of Asian equity strategy at UBS. “Fed not cutting and weak currencies mean less room for rate cuts in Asia.”

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

“The onshore (Chinese) market is more stable with respect to external noise,” said Lui, who said mainland investors are still moving funds from low-yield savings accounts to the equity market. .

However, mainland Chinese equities have continued to decline by 17 percent since a peak on October 8 last year, as hopes for a bazooka-style stimulus from Beijing faded and concerns over the economic impact of the second Donald Trump’s term hit the market.

“Some stimulus measures are a positive surprise,” said Tirumalai, who acknowledged China is still in a “bear market”. “The expansion of the trade-in method to a wider range of consumer products for example will come sooner than we thought.”

Oil prices rose to a four-month high after the US announced sweeping new sanctions on Russian oil on Friday.

Brent crude prices, the international benchmark, rose 1.6 percent to $81 a barrel, while the US gauge West Texas Intermediate gained 1.7 percent to $77.90 a barrel.