The euro slid marginally to $1.10430, the lowest since August 19
The dollar jumped to a two-week high against the euro on Monday as traders pared bets for aggressive policy easing by the Fed with the focus now moving to a crucial U.S. jobs report at the end of this week.
The dollar advanced to its strongest since August 21 on the yen, boosted by a rise in long-term Treasury yields to the highest since mid-August after a closely watched measure of U.S. inflation held steady, reducing the imperative for the Federal Reserve to reduce interest rates by 50 bps on September 18.
It gained 0.27% to 146.60 yen, and was last at 146.29.
The dollar index measure against major peers rose to 101.79 early in the Asian day, a level last seen on August 20.
The euro slid marginally to $1.10430, the lowest since August 19.
Traders currently lay 33% odds of a 50-basis point Fed rate cut this month, versus 67% chance of a quarter-point cut. A week earlier, expectations were 36% for the larger cut.
A U.S. public holiday on Monday makes for a potentially slow start to the week for the dollar, analysts said, but the rest of the days sees a steady flow of macroeconomic data that culminates with non-farm payrolls (NFP) on Friday.
Economists surveyed by Reuters expect the addition of 165,000 jobs in August, rising from a 114,000 increase in the prior month, and that the unemployment rate ticked lower to 4.2%.
Should the U.S. economy add 150,000 jobs or more and the unemployment rate ease to 4.2% or below, it would increase confidence that the economy is on target for a soft landing, strengthening expectations for a 25-basis point rate cut this month, according to IG analyst Tony Sycamore.
Nevertheless, Sycamore believes recent dollar strength against the likes of the yen is unlikely to last.
The pair would need to see a sustained break above resistance at 152.00 to negate the downside risks, he added.
For the euro though, the outlook for both the Fed and ECB to ease this month means it is difficult to make a strong case in favour or against the EUR/USD, Sycamore said.
