Dollar Recovers as Traders Scale Back Bets of Big Fed Rate Cut
The dollar recouped some of last week's losses on Monday as investors looked ahead to U.S. inflation data after Friday's mixed payrolls report sparked uncertainty about the size of a Federal Reserve rate cut next week.
The yen weakened against the dollar after a four-day run of gains. It was last down 0.7% to 143.35 per dollar, after having touched a one-month high of 141.75 on Friday.
Focus turned to Wednesday's U.S. inflation report as the next main indicator that could alter market pricing for the Fed's September meeting.
The euro slipped 0.3% to $1.1048, while the pound eased 0.3% to a more than two-week low of $1.3083.
Against a basket of currencies, the dollar edged up 0.37% to 101.56.
Friday's highly anticipated U.S. jobs data failed to offer clarity to traders on the question of whether the Fed would deliver a regular 25 basis point rate cut or an outsized 50 bps one at its Sept. 17-18 policy meeting.
While employment increased less than expected in August, the jobless rate ticked lower and wage growth remained solid, indicating that the U.S. labour market was cooling, but not at a pace that warranted panic over the economy's growth outlook.
Markets fully price in a 25 bps rate cut next week and a roughly 25% chance of a bigger, half-point move. On Friday, pricing for a big cut was as high as 50%.
Fed policymakers on Friday signalled they are ready to kick off a series of rate cuts, noting a cooling in the labour market that could accelerate into something more dire in the absence of a policy shift.
Data on Monday showing Japan's economy expanded in April-June at a slightly slower pace than initially reported, had little impact on currencies.
Source : Reuters
