The dollar remained under pressure on Monday despite rising expectations of a US interest rate hike, as tensions in the Middle East fueled concerns over mounting inflationary pressures that could prompt central banks around the world to tighten monetary policy.
The US currency was also weighed down by a shift in investor sentiment toward the Japanese yen, along with concerns over rising US debt and uncertainty surrounding economic policies.
Currency movements were limited at the start of Asian trading, with US markets closed for a holiday. The dollar, however, struggled to hold onto the temporary gains it made following Friday’s stronger-than-expected US jobs report.
The euro edged up to $1.1618, while the British pound was little changed at $1.3519.
The dollar index, which measures the US currency against a basket of major currencies, fell 0.07% to 99.09, close to its recent low of 98.558.
Traders raised their expectations to around 57% that the Federal Reserve will raise interest rates this month following the release of the nonfarm payrolls report. The decision is expected to depend heavily on inflation data due Friday.
Elias Haddad, global head of market strategy at BBH, said, “Any elevated reading in the consumer price index would make a September rate hike almost certain and support the US dollar. A weaker reading, however, would strengthen the case for leaving rates unchanged.”
He added, “Even if a September Fed rate hike becomes a done deal, we doubt the dollar will reach new highs, as tightening by other major central banks limits the divergence in monetary policies.”
The yen rose more than 0.2% to 155.88 per dollar on Monday, extending its gains after an economic adviser to Japanese Prime Minister Sanae Takaichi predicted that the Bank of Japan would raise interest rates this month.
The Australian dollar rose 0.12% to $0.7208, while the New Zealand dollar was steady at $0.5880.
Bitcoin held above $80,000, trading most recently at $80,145.95, after receiving recent support as investors sought to diversify their holdings into other assets away from the dollar.
Source: Reuters
