The US dollar today reached a two-week high against the euro, as market participants revised their expectations for the Federal Reserve’s monetary policy. The shift in sentiment comes ahead of an important U.S. jobs report due this weekend.
The dollar’s strength was the most striking against the Japanese yen, hitting its highest level since August 21. This was supported by a rise in long-term US Treasury yields, which reached their highest levels since mid-August. The rise in yields followed a flat measure of inflation in the US, reducing the urgent need for the Federal Reserve to implement a significant 50 basis point rate cut on September 18.
The dollar rose 0.27% to 146.60 yen, last noted at 146.29. The dollar index, which compares the dollar to a basket of major currencies, rose to 101.79 early in the Asian day, a level not seen since Aug. 20. Meanwhile, the euro fell to $1.0430, its lowest level since August 19.
At the moment, traders point to a 33% probability of a 50 basis point rate cut this month, while a quarter-basis point rate cut is 67%. This is a change from the previous week when there was a 36% forecast for a deeper rate cut.
Read also:Dollar gives up two-week peak due to profit-taking
Despite the U.S. public holiday on Monday, which may slow down the start of the week for the dollar, a series of macroeconomic data is expected in subsequent days, which will peak with Friday’s nonfarm payrolls data. Economists expect 165,000 jobs to be added in August, up from 114,000 added the previous month, and expect the unemployment rate to fall to 4.2%.
The IG analyst commented that if the US economy adds 150,000 jobs or more and the unemployment rate falls to 4.2% or less, this will boost confidence in the economy achieving a smooth downturn, reinforcing expectations of a 25 basis point rate cut. However, he also indicated that the recent strength of the dollar against the yen may not be sustainable unless there is a steady move above the resistance level of 152.00.
Regarding the euro, the expectation of monetary policy easing by both the Federal Reserve and the European Central Bank makes it difficult to argue strongly for or against the EUR/USD pair, according to Sycamore.
In the bond market, US Treasuries will not trade today due to the holiday, but the yield on the 10-year bond last hit 3.9110% after seeing a rise of 4.4 basis points on Friday. Sterling remained flat at $1.3129, staying near Friday’s low of $1.31095, its weakest level since Aug. 23.
Reuters contributed to this article.
This article was translated with the help of an artificial intelligence program after an editor’s review. For more details please refer to Banha Terms and Conditions
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