U.S. dollar hits 4-month high against euro as traders bet on earlier Fed tapering

Brent crude futures fell by $2.82, or 4.2%, to $67.88 a barrel by 0930 GMT after a 6% slump last week for their biggest weekly loss in four months.


London: The dollar touched a four-month high versus the euro and a two-week peak to the yen as traders positioned for an earlier tapering of Federal Reserve stimulus. The greenback strengthened as far as $1.1742 to the single currency, extending a 0.6% pop from Friday, when a strong U.S. jobs report stoked bets that a reduction in asset purchases could start this year and higher interest rates could follow as soon as 2022.It climbed as high as 110.37 yen, following a 0.4% rally at the end of last week.“U.S. payrolls were a game-changer,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.

The dollar index is eyeing a close above 93, while the currency could head for $1.1704 per euro, Weston wrote, adding that it could climb further versus the yen too should U.S. yields continue to tick higher.

The benchmark 10-year Treasury yield jumped 8 basis points on Friday to a two-week high of 1.3053%. There was no trading in Tokyo on Monday with Japan shut for a national holiday. Singapore markets were also closed.

Friday’s non-farm payroll report showed jobs increased by 943,000 in July compared with the 870,000 forecast by economists in a poll. Numbers for May and June were also revised up.

“The strong U.S. report appears to clear the last hurdle for the Fed’s tapering,” Mizuho Bank strategist Ken Cheung wrote in a research note. Cheung said market participants had pushed forward the Fed’s tapering announcement to as early as the Jackson Hole symposium in late August.

The Fed has made the labor market recovery a condition of tighter monetary policy, and most officials back the view that a jump in inflation will prove transitory, though there is debate over how prolonged it could be.Traders will be keenly watching a U.S. consumer price report on Wednesday.

Last week, Fed Vice Chair Richard Clarida suggested that conditions for hiking interest rates might be met as soon as late 2022.The dollar climbed to a nearly two-week high of $1.38565 to sterling on Monday.

It earlier rallied as much as 0.4% against each of its Australian and New Zealand counterparts, before reversing course to post small losses. The Aussie was 0.03% higher at $0.7356 and the kiwi gained 0.16% to $0.70205.

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