The dollar index slid 0.07% to 102.46, having risen on Friday to 102.69, its highest since mid August
The U.S. dollar stalled near a seven-week high on Monday after last week’s strong U.S. jobs data and as fears that Middle East tensions would spill into a wider conflict drove bids for safe havens.
The jobs report for September showed the biggest jump in nonfarm payrolls (NFP) in six months, a drop in the unemployment rate and solid wage rises, prompting markets to scale back bets on further hefty U.S. rate cuts.
Markets expect the Fed to cut rates by just 25 basis points in November, rather than 50 basis points, following the jobs data. As per CME’s FedWatch tool markets are pricing in a 85% probability of a quarter point cut, up from 47% a week ago, and a 0.15% prospect of no cut at all.
A rise in the yield on the benchmark U.S. 10-year note above 4% for the first time in two months was also a support.
Against the Japanese yen, the dollar softened after Atsushi Mimura, Japan’s top currency diplomat, issued a warning against speculative moves on the foreign exchange market.
Dollar/yen dropped 0.49% on the day to 147.98 after reaching its highest since August 15 at 149.10 overnight.
The market got cautious as we approached 150 on the yen, but I don’t think this is a big move yet, according to Marc Chandler, chief market strategist at Bannockburn Global Forex.
The dollar index measuring the greenback against six major currencies slid 0.07% to 102.46, having risen on Friday to 102.69, its highest since mid August. The dollar logged a weekly gain of more than 2% last week, its biggest in two years.
The euro was down 0.01% at $1.0975 , feeling some pressure after German industrial orders dropped significantly more than expected in August, adding to signs that manufacturing in Europe’s biggest economy remains in the doldrums.
Overall though, the tone was still dollar-positive, along with currencies seen as flight-to-safety rivals on worries about the geopolitical scenario.
As you look across some of the more risk-sensitive currencies in the G10 space, you do have the dollar generally stronger, but a lot of the traditional safe havens – yen, Swiss and the dollar – are relative outperformers today, said Brian Daingerfield, foreign exchange strategist at NatWest Markets, New York.
That does reflect equities turning a little bit lower here and oil prices having risen further as the markets are watching very closely developments in the Middle East, he added.
