By Ankur Banerjee

SINGAPORE (Reuters) – The dollar held firm on Monday after a strong U.S. jobs report suggested the Federal Reserve could stay hawkish for longer, while the yen was hit by news that Bank of Japan Deputy Governor Masayoshi Amamiya was being sounded out to be the next governor.

The newspaper reported, citing anonymous government and ruling party sources, that Prime Minister Fumio Kishida’s administration was in the final stages of deciding on current governor Haruhiko Kuroda’s successor along with two new deputy governors.

In a news conference on Monday, Deputy Chief Cabinet Secretary Yoshihiko Isozaki said there was no truth to the Nikkei report.

The yen weakened 0.42% to 131.75 per dollar, having touched three-week lows of 132.60 earlier in the session.

“Amamiya has helped Kuroda since 2013 on monetary policies, and is considered the most dovish among the contenders, which is thrashing hopes that BOJ policy normalization could progress under the new chief,” Saxo Markets strategists said.

The BOJ’s loose policy settings have drawn increasing criticism from many quarters, including opposition politicians and traders, for distorting market function.

Amamiya played a key role in drafting Kuroda’s asset-buying programme in 2013 and consistently called for keeping ultra-low interest rates. But he also said in July the BOJ must “always” think about the means of exiting ultra-loose monetary policy.

On Friday, the U.S. Labor Department’s closely watched employment report showed that nonfarm payrolls surged by 517,000 jobs last month. Economists in a Reuters poll had expected a gain of 185,000.

The dollar skipped higher and was firm on Monday. Against a basket of currencies, the U.S. currency touched a nearly 4-week high of 103.22 and was last at 103.03. The index had gained 1.1% on Friday.

The Fed on Wednesday raised rates by 25 basis points and said it had turned a corner in the fight against inflation, leading investors to price in a more dovish path going forward.

But the eye-popping payrolls number along with U.S. services industry rebound in January have investors questioning that the Fed is almost done with its monetary tightening policy.

“The worry of course is that the much better than expected data is bad news if the Fed sees this as bolstering its case of two more hikes and keeping rates elevated for longer,” said Tapas Strickland, head of market economics at National Australia Bank (OTC:).

Citi strategists said Fed Chair Jerome Powell and the broader committee are increasingly enthusiastic about the possibility of a “soft landing” in which inflation dissipates despite a resilient labour market.

But Friday’s report, Citi said, should make the Fed even more concerned that labour markets are too tight to be consistent with at-target inflation.

Traders are pricing in the Fed’s policy rate to peak at 5.05% in June before the central bank cuts rates in the second half of the year.

Also boosting the safe-haven dollar was escalating tension between U.S and China after a U.S. military fighter jet shot down a suspected Chinese spy balloon off the coast of South Carolina on Saturday.

The euro was up 0.02% at $1.0795. Europe’s single currency slid 1% on Friday and touched nearly three-week lows of $1.07815 earlier in the session.

Sterling last fetched $1.2057, up 0.05% on the day, having touched a one-month low of $1.2031 earlier on Monday.

The Australian dollar rose 0.36% to $0.694, while the was down 0.08% to $0.633.

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Currency bid prices at 0521 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.0794 $1.0795 +0.01% +0.76% +1.0800 +1.0782

Dollar/Yen 131.7250 131.1050 +0.41% +0.31% +132.3700 +131.6100

Euro/Yen 142.20 141.59 +0.43% +1.35% +142.8200 +142.0000

Dollar/Swiss 0.9253 0.9260 -0.06% +0.09% +0.9284 +0.9254

Sterling/Dollar 1.2059 1.2049 +0.11% -0.26% +1.2062 +1.2031

Dollar/Canadian 1.3406 1.3400 +0.02% -1.08% +1.3419 +1.3400

Aussie/Dollar 0.6936 0.6924 +0.19% +1.77% +0.6947 +0.6885

NZ 0.6325 0.6328 +0.01% -0.34% +0.6333 +0.6301

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ