Dollar Holds Near Two-Month Low as Markets Await US Inflation Data
The dollar hovers near a two-month low as investors await US inflation data for clues on the Fed's rate path.
The US dollar remained close to a two-month low against major currencies on Monday, as traders turned their attention to upcoming inflation figures that could shape the Federal Reserve's monetary policy outlook.
The euro edged up to $1.1558, hovering near its strongest level since mid-June, while sterling held steady at $1.3490, close to a five-week peak. The yen traded firmly at 157.90 per dollar, having given back some gains from earlier intervention but staying well above the multi-decade low of roughly 164 hit late last month.
The dollar index, which measures the currency against six major peers, was little changed at 99.6, near its lowest point since June 2.
Friday's data showed the US economy unexpectedly lost jobs in July, with prior months' gains also revised lower. That report dampened expectations for a rate hike next month, pushing Treasury yields down. The yield on benchmark 10-year notes stood at 4.637%, while futures markets reduced the probability of a September move to around 44%, down from 67% a week earlier.
Analysts say the weaker labour market has dragged down real-rate expectations and extended the dollar's decline, but the picture is not yet a clean easing story. Perceptions around US inflation data will likely be the biggest factor for currencies this week.
Consensus estimates point to core consumer prices rising 0.2% month-on-month in July, lifting the annual rate to 2.5% and continuing a gradual moderation. The annual rate was 2.6% in June. Producer price data on Thursday and retail sales figures on Friday will provide further guidance.
Oil prices rose on Monday, with Brent futures up 1.4% at roughly $85 per barrel, amid uncertainty over the reopening of the Strait of Hormuz. Iran said a deal with Oman defining new shipping lanes was in its final stages but added that the US must still meet other conditions.
In Asia, the New Zealand dollar and Australian dollar each slipped 0.1% to $0.7062 and $0.5889 respectively. Markets are also awaiting the Reserve Bank of Australia's rate decision on Tuesday, with the central bank expected to hold its key rate at 4.35% for the rest of the year.