Dollar consolidates after strongest week in two years

NEW YORK :The U.S. dollar stalled near a seven-week high on Monday as investors reassessed their positions 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 closely-watched jobs report for September showed the biggest jump in nonfarm payrolls 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 Federal Reserve to cut rates by just 25 bps in November, rather than 50 bps, following the jobs data. According to CME’s FedWatch tool, markets are pricing in a 85 per cent chance of a quarter point cut, up from 47 per cent a week ago, and a slim 0.15 per cent prospect of no cut at all.
A rise in the yield on the benchmark U.S. 10-year note above 4 per cent for the first time in two months was also a psychological support.
Against the Japanese yen, the dollar weakened after Atsushi Mimura, Japan’s top currency diplomat, issued a warning against speculative moves on the foreign exchange market.
Dollar/yen fell 0.49 per cent on the day to 147.98 after hitting 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,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
The dollar index measuring the greenback against a basket of six currencies slipped 0.07 per cent to 102.46, having risen on Friday to 102.69, its highest level since mid August. The dollar logged a weekly gain of more than 2 per cent last week, its biggest in two years.
In the Middle East, Hezbollah fired rockets at Israel’s third largest city Haifa early on Monday as Israeli forces looked poised to expand ground incursions into southern Lebanon on the first anniversary of the Gaza war, which has spread conflict across the region.
The euro was off just 0.01 per cent at $1.0975, feeling some pressure after German industrial orders fell significantly more than expected in August, adding to signs that manufacturing in Europe’s largest 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 picture.
“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 edged up further as the markets are watching very closely developments in the Middle East,” he continued.
Against the Swiss franc, the dollar weakened 0.45 per cent to 0.854.
The Canadian dollar weakened 0.37 per cent versus the greenback to 1.36 per dollar.
Sterling fell 0.25 per cent to $1.3083. Last week it recorded its biggest daily fall since April after Bank of England Governor Andrew Bailey was quoted as saying the central bank might move more aggressively to lower borrowing costs.
The Australian dollar weakened 0.6 per cent versus the greenback and the kiwi weakened 0.63 per cent.
In cryptocurrencies, bitcoin gained 1.49 per cent to $63,334.40. Ethereum rose 1.13 per cent to $2,456.20.
Currency bid prices at 7 October 03:26 p.m. EDT
Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid
Dollar index 102.5 102.53 -0.03 per cent 1.11 per cent 102.62 102.36
Euro/Dollar 1.0971 1.0976 -0.05 per cent -0.61 per cent $1.0987 $1.0955
Dollar/Yen 148.08 148.775 -0.5 per cent 4.96 per cent 149.06 147.875
Euro/Yen 1.0971 163.16 -0.43 per cent 4.39 per cent 163.57 162.3
Dollar/Swiss 0.8543 0.8583 -0.47 per cent 1.5 per cent 0.8603 0.8535
Sterling/Dollar 1.308 1.3123 -0.32 per cent 2.79 per cent $1.3133 $1.306
Dollar/Canadian 1.3629 1.3578 0.39 per cent 2.83 per cent 1.364 1.3551
Aussie/Dollar 0.6751 0.6793 -0.63 per cent -1 per cent $0.681 $0.6744
Euro/Swiss 0.9373 0.9416 -0.46 per cent 0.94 per cent 0.9429 0.9366
Euro/Sterling 0.8386 0.8358 0.34 per cent -3.28 per cent 0.8399 0.8357
NZ Dollar/Dollar 0.6119 0.616 -0.63 per cent -3.14 per cent $0.6169 0.6113
Dollar/Norway 10.6456 10.6354 0.1 per cent 5.04 per cent 10.674 10.6128
Euro/Norway 11.6802 11.682 -0.02 per cent 4.07 per cent 11.7116 11.6454
Dollar/Sweden 10.3594 10.3681 -0.08 per cent 2.9 per cent 10.3822 10.3462
Euro/Sweden 11.3657 11.3789 -0.12 per cent 2.16 per cent 11.387 11.361