Dollar Climbs for Fifth Day as US Traders Return From Holiday – Bloomberg
The U.S. dollar reached near its highest point in two weeks on Tuesday, September 2, 2024. Investors are now focused on upcoming economic data, including U.S. payroll reports expected this Friday. This data is seen as critical in determining the direction of interest rates from the Federal Reserve. With a potential rate cut looming, the dollar’s performance is under close watch. Markets are preparing for a decision that could either sustain the dollar’s current strength or weaken it depending on the data.
The Japanese yen, meanwhile, recovered from a recent four-day losing streak. Media reports suggested that the Bank of Japan (BOJ) may continue raising interest rates if the country’s economy and inflation align with expectations. This news helped strengthen the yen, pushing it up by 0.7%, with the dollar trading at 145.815 yen.
In a letter to the Japanese government, the BOJ governor reiterated that further rate hikes were likely if the economic conditions remained favorable. This was a reassuring signal for investors who had been concerned about Japan’s recent economic trajectory. Kathleen Brooks, director of research at XTB, noted, “The yen’s rise is largely due to these comments from the BOJ.”
While the yen gained strength, the euro and British pound experienced slight drops. The euro declined 0.13% to $1.1056, while the pound slipped 0.17% to $1.3124. Both currencies have been feeling the pressure from the dollar’s strong performance. The dollar index, which measures the U.S. currency against six major rivals, remained steady at 101.68, just below the recent two-week high of 101.79.
Much of the market’s attention is now focused on the U.S. jobs data, which will be released at the end of this week. The Federal Reserve’s Chair, Jerome Powell, has indicated that a rate cut is likely, but the exact amount remains uncertain. The jobs data will play a crucial role in determining whether the Fed cuts rates by 25 basis points or opts for a larger 50-point reduction.
Before Friday’s payroll data, investors will also look to Wednesday’s job openings report and Thursday’s jobless claims data for additional clues. Current market forecasts predict a 69% chance of a 25-point rate cut, with a 31% chance of a larger 50-point cut. Charu Chanana, head of currency strategy at Saxo, stated, “If the jobs data is solid, a 25 bps cut seems likely. But weaker data, especially if payrolls fall below 130,000, might lead to a more aggressive cut.”
Economists surveyed by Reuters expect U.S. job growth to slow down slightly in August, predicting an increase of 165,000 jobs, compared to 114,000 in July. This jobs report will be key in shaping the Fed’s decision later in September, as it navigates concerns over inflation and employment.
Meanwhile, other major currencies also reacted to the global market movements. The Australian dollar fell by 0.6% to $0.6749, while the New Zealand dollar slipped by 0.61% to $0.6196. Both currencies had experienced significant gains last month but are now facing pressure from the rising U.S. dollar.
As the week unfolds, market watchers will continue to closely monitor these economic indicators. The upcoming U.S. payroll report on Friday is expected to have a significant impact, not just on the dollar but on global financial markets.
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