- Yen Slides to 161.97 Against Dollar, Marking Weakest Level Since 1986
- Dollar index eases 0.28% to 101.08, but remains near a 13-month high
- Economists expect Thursday’s US jobs report to show 110,000 jobs added, with unemployment holding at 4.3%
The U.S. dollar slipped on Monday, but remained close to a 13-month high as optimism around U.S. growth, expectations for possible Federal Reserve rate hikes, and continued strength in AI-linked U.S. equity flows helped keep demand for the greenback supported.
The Japanese yen also fell to its weakest level against the U.S. dollar since 1986.
A more hawkish shift at the Fed’s June meeting under new Fed Chair Kevin Warsh has pushed traders to price in a higher chance of rate hikes this year, as policymakers continue trying to pull inflation back toward their 2% annual target. Fed funds futures now imply a 64% probability of a rate hike by September.
This week’s main U.S. data focus will be Thursday’s June jobs report. Three straight months of stronger-than-expected payroll growth have supported the Fed’s hawkish pivot. A softer turn in the labor market, however, could encourage policymakers to reconsider the current policy path.
“The labor market appears to have accelerated,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “The concerns that the doves had pointed to about labor markets slowing down seem to have passed.”
Economists polled by Reuters expect the data to show that employers added 110,000 jobs last month, with the unemployment rate holding steady at 4.3%.
Meanwhile, the U.S. Supreme Court refused on Monday to allow Donald Trump to fire Fed Governor Lisa Cook. Trump responded by saying his administration would act immediately to ensure Cook would not be involved in decisions affecting the welfare of the United States.
Traders are also watching efforts to end the U.S.-Israeli war with Iran.
Iranian and U.S. technical teams working on the implementation of an interim peace deal are expected to meet in Doha in the coming days, a source told Reuters on Monday, after weekend tit-for-tat strikes threatened to derail the fragile agreement.
The U.S. Dollar Index, which tracks the dollar against six major currencies, dipped 0.28% to 101.08. The index is still up 2.17% this month.
“That is quite significant because, since April of last year, there’s been so much discussion about the structural decline in the value of the dollar,” Rabobank chief FX strategist Jane Foley said. “But I think, even if you vehemently believe that, you’ve got to admit that there is space for a cyclical uptrend.”
Weekly figures from the U.S. market regulator showed investors held their largest bullish position in the dollar against other major currencies since 2019, worth about $36.4 billion, according to LSEG data.
The euro rose 0.39% to $1.1427 after hitting a 13-month low against the U.S. dollar last week. The single currency is still down 2% this month.
The European Central Bank’s annual forum begins Monday, opened by President Christine Lagarde. A key policy panel on Wednesday will feature Warsh, whose comments are likely to be closely watched by investors looking for more clarity on the new Fed chief’s rate outlook.
The Japanese yen touched 161.97 against the U.S. dollar, its weakest level since 1986.
“The Bank of Japan’s long-awaited 25bp rate hike to 1.00% has done little to offset the still-wide interest rate differential with the United States, especially after the Federal Reserve maintained a hawkish stance and signaled rates are likely to remain elevated for longer,” analysts at LMAX Group said in a report.
The British pound strengthened 0.42% to $1.3256, after touching its lowest level in seven months last week.
Andy Burnham, Britain’s prime minister-in-waiting, vowed on Monday to deliver major political change by shifting more power to the country’s regions and encouraging collaboration over conflict as part of a 10-year mission to drive “good” growth.
Investors are now watching his choice for finance minister, which could be key for the outlook for both the pound and the gilt market. Burnham said any economic plans would be “backed by discipline” and would follow current fiscal rules.
