Dollar hits four-month high on euro amid bets for earlier Fed taper

TOKYO (Reuters) – 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.

FILE PHOTO: A U.S. dollar banknote is seen in this illustration taken May 26, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

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 JPY=EBS, 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 Reuters 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 labour 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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Currency bid prices at 0547 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.1763 $1.1763 +0.00% -3.72% +1.1769 +1.1742

Dollar/Yen

110.1800 110.2100 -0.03% +6.67% +110.3100 +110.1800

Euro/Yen

129.60 129.65 -0.04% +2.11% +129.6700 +129.5100

Dollar/Swiss

0.9148 0.9152 -0.04% +3.40% +0.9162 +0.9147

Sterling/Dollar

1.3871 1.3875 -0.07% +1.49% +1.3874 +1.3857

Dollar/Canadian

1.2559 1.2552 +0.07% -1.36% +1.2583 +1.2558

Aussie/Dollar

0.7357 0.7355 +0.03% -4.37% +0.7360 +0.7329

NZ

Dollar/Dollar 0.7022 0.7011 +0.16% -2.21% +0.7024 +0.6980

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

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