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Dollar stabilizes ahead of Yellen’s speech

Dollar

The dollar held firm against a basket of major currencies on Monday, above its lowest levels in more than three weeks, after a poor payrolls report caused investors to rule out the chance of a U.S. interest rate increase next week.

Traders await clues on the timing of a rate hike from Federal Reserve Chair Janet Yellen, who is scheduled to speak about the U.S. economy and monetary policy at an event in Philadelphia at 12:30 p.m. (1630 GMT).

On May 27, Yellen said a rate increase might be appropriate in the coming months if the economy and jobs market improve further.

“After Friday’s data, markets are clearly interested in any change in her message from two Fridays ago,” ScotiaBank analysts wrote in a research note.

The greenback held steady following Friday’s steep losses, supported by a backup in U.S. yields, analysts said.

The dollar index edged up 0.1 per cent to 94.109. It dropped 1.54 per cent on Friday to 93.855, its lowest since May 12 and its second biggest single-day decline so far in 2016.

Against the yen, the dollar rebounded 0.6 per cent to 107.15 yen on Monday due to bargain-hunting. It (Other OTC: ITGL – news) had slid to a one-month low of 106.35 on Friday.

The euro fell 0.2 per cent against the greenback after reaching a three-week high at $1.1375 (£0.79) on Friday.

Friday’s data showed U.S. non-farm payrolls increased by 38,000 jobs last month. That was the weakest reading in more than 5-1/2 years and missed a forecast of a 164,000 increase.

U.S. interest rates futures implied traders nearly priced out the chance the Fed would raise rates at its policy meeting next week, Reuters data showed.

With (Other OTC: WWTH – news) worries also increasing about a British exit from the European Union, or Brexit, investors are increasingly uncertain about whether the Fed will raise rates in the near term.

Sterling fell more than 1 per cent to a three-week low after a slew of polls pointed to the “leave” camp leading ahead of the June 23 referendum on whether Britain stays in the EU.

The pound was 0.7 per cent lower at $1.4413 (£1.00) after falling in Asian trade to $1.4352 (£1.4352), its lowest since May 16.

Paul

The author Paul