Dollar edges lower as currency markets pull back on Friday's moves
LONDON (Aug 8) - The dollar fell on Monday, losing some of the gains it had made from Friday's U.S. jobs data, as currency markets pulled back on their initial reaction and waited for Wednesday's inflation data to give more clues about the Federal Reserve's next steps.
Higher-than-expected U.S. employment figures last week saw the dollar strengthen against major peers because the data was seen by traders as an indication that the Fed could raise interest rates more aggressively to combat inflation.
But this move cooled on Monday, with the dollar index slipping to 106.51 by 1035 GMT, down 0.1% on the day, compared with Friday's 10-day high of 106.930 .
Traders were pricing in a roughly 69% chance of the Fed raising rates by 75 basis points (bps) at its September meeting, according to Refinitiv data .
Fed Governor Michelle Bowman said on Saturday that the U.S. central bank should consider more 75 bps hikes at coming meetings to bring inflation back down.
"The U.S. dollar has been supported by the combination of stronger U.S. economic data releases and hawkish comments from regional Fed presidents that have encouraged market participants to push back expectations for a dovish policy pivot from Fed," wrote MUFG currency analysts Derek Halpenny and Lee Hardman in a note to clients.
"We believe there is room for the U.S. dollar to rebound further in the near-term, and have recommended a new long USD/CAD trade idea to reflect our bullish outlook for the U.S. dollar."
Reuters
