Dollar steadies as rate hike concerns fade

by Jonathan Adams

The U.S. dollar index was flat at 92.334, after dropping nearly 0.3% to that level on Friday

The dollar paused on Monday, after recent gains as details of last week’s U.S. jobs report calmed concerns about the timing of U.S. interest rate hikes.

While the June job creation figure beat forecasts, unemployment increased and hourly earnings growth slowed – suggesting rate rises could be further away than markets have come to fear.

Against the Australian and New Zealand dollars the greenback dropped 0.7% and 0.9%, respectively in the wake of the data on Friday, and then steadied on Monday.

The dollar clawed back slightly against the yen, gaining 0.14% to 111.15 yen early in the Asia session, after falling just below 111 yen following the jobs report. The euro was steady at $1.1859, off Friday’s three-month low of $1.1807.

The report was mixed enough to probably keep the Fed from announcing tapering soon, said Westpac analyst Imre Speizer on the phone from Christchurch, referring to the U.S. Federal Reserve which sets the benchmark U.S. policy rate.

I think the market was thinking you’d get a signal at the Jackson Hole meeting in August. This report says that that just might be a bit early, he said.

Sterling was steady at $1.3820.

The U.S. dollar index was flat at 92.334, having dropped nearly 0.3% to that level on Friday.

Minutes from Fed’s June meeting are due to be published on Wednesday and might provide more clues on policymakers’ thinking.

The minutes will likely reinforce the FOMC’s hawkish shift, said Commonwealth Bank of Australia analyst Joe Capurso, referring to the rate-setting Federal Open Market Committee. More information on when the FOMC could taper its asset purchases can boost U.S. interest rates and the dollar.

He said: So can further evidence that the FOMC’s outlook for inflation is shifting. In particular, analysts will look for signs that the FOMC is less confident the spike in inflation will be transitory and/or that the FOMC’s tolerance for an inflation overshoot is waning.

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