The US dollar climbed at the start of the week, hitting a more than three-week lows against major currencies. This was prompted after Friday’s release of a downbeat employment data triggered investors to doubt the prospects of a US rate increase later in the month.
The dollar index plunged 1.6% previously on Friday with a low of 93.855—its second steepest one-day decline of 2016. Today, however, it has climbed 0.2% to 94.246
US Employment Data
Analysts had expected an increase of 164,000 jobs. However, on Friday, the employment report revealed nonfarm payrolls only gained 38,000 jobs in May, the lowest in more than 5 ½ years.
This has caused investors to become skeptical and uncertain of an interest rate hike from the Federal Reserve’s June policy meeting to be held on 14 and 15. It also reduced the possibility of a July rate increase as well—from 60% to around 30%.
Concerns regarding Brexit are also making investors gradually doubtful of the Fed raising rates in the near term.
Traders assume Fed Chair Janet Yellen, who is set to speak regarding economic outlook and monetary policy at 16:30 GMT to the World Affairs Council of Philadelphia, will construct her message to keep expectations for a July increase going.
Nomura currency strategist Yujiro Goto said that June rate hike expectations have dissipated. “While the focus has shifted to July, we expect the dollar to be rather subdued this week, with not much of economic data out of the US. Dollar/Yen should trade in a 105-110 yen range while the euro will be in a $1.10-$1.15 range.”
USD Against Currencies
Elsewhere, the greenback slipped to a one-month low of 106.35 against the Japanese yen on Friday, but recovered to trade 0.6% higher on Monday. This was due to bargain-hunting following its steep decline on Friday.
A number of traders are receiving wary of intervention threats from Japanese officials with the yen nearing its 18-month high of 105.55 reached in early May. A trader at a major bank in Japan stated that, “We are close to the 105 handle, where Finance Minister Taro Aso talked about intervention last time. So there is a certain degree of cautiousness.”
Meanwhile, the pound decreased 0.9% at $1.4375, after sinking to as low as $1.4352—the lowest since May 16. The euro declined 0.2% VS the dollar having advanced to its peak in three weeks at $1.1375 on Friday.
According to traders, Brexit distresses weighed the single currency lower against the greenback. Sterling dropped more than 1% to a three-week low against the dollar after two polls during the weekend revealed that the “Leave” vote is leading ahead of Britain’s June 23 referendum on whether the country would keep its European Union membership or not.