Dollar Stays Under Pressure

The dollar index held below 101 on Tuesday, remaining under pressure as investors scaled back expectations for Federal Reserve rate hikes following a weaker-than-expected US jobs report. Data released last week showed a sharp slowdown in job growth in June, alongside downward revisions to payroll figures for the previous two months. Markets are now pricing in roughly a 50% chance of a Fed rate increase in September, down from about two-thirds before the latest employment data. Investors are now awaiting the minutes of the Fed’s June policy meeting for further clues on the interest rate outlook, while also monitoring US trade deficit figures due later in the day. The dollar weakened against most major currencies but remained near 40-year highs versus the Japanese yen.

The dollar index edged higher to start the week, trading around 101, but remained close to a three-week low after posting its largest weekly decline since April last week. The greenback came under pressure after the June US payrolls report showed job growth slowed sharply, prompting investors to scale back expectations for Fed rate hikes this year. Meanwhile, oil prices have retreated to pre-conflict levels, helping to ease concerns over renewed inflationary pressures. Markets are now pricing a 56% probability of a Fed rate hike as soon as September, down from around 64% before the jobs report was released. Investors will closely monitor the release of the FOMC minutes later this week for further clues on the Fed's policy outlook. On Monday, the dollar posted its strongest gains against the yen, which remains near a 40-year low, as the threat of official intervention continues to keep traders on edge.

The dollar index remained below 101 on Monday after posting weekly losses, as softer-than-expected US jobs data and lower oil prices led traders to scale back expectations for Federal Reserve interest rate hikes. Data released last week showed US nonfarm payrolls increased by just 57,000 in June, the smallest gain in four months and well below forecasts of 110,000, prompting markets to reduce bets on a September rate hike. Oil prices also edged lower as recovering energy flows through the Strait of Hormuz and the prospect of higher OPEC+ output fueled concerns about a potential supply glut. That has helped ease inflationary pressures that had previously bolstered expectations of further rate hikes. Investors now await the minutes of the Federal Reserve’s June policy meeting later this week for fresh clues on the outlook for interest rates.