TOKYO- The dollar hung near a three-week low to major peers on Monday as markets continued to wager that the Federal Reserve has less tightening to do with the US economy at risk of recession.
The dollar index, which measures the currency against six counterparts, edged 0.1 percent lower to 105.89, slipping back toward Friday’s low of 105.53, a level not seen since July 5.
Data at the end of last week tossed the greenback in both directions, rising initially after the personal consumption expenditures (PCE) price index showed the fastest inflation since 2005, only to sink after the final University of Michigan report – closely watched by Fed policymakers – showed slipping consumer inflation expectations.
The big economic focus for this week will be the monthly US jobs report on Friday.
Traders currently price about 31 percent probability that the Fed will keep its current 75 basis-point pace of rate hikes at its next meeting on Sept. 21, with 69 percent odds for a smaller half point increase.
“Markets look to be betting the Fed has done the lion’s share of its task on inflation and will be receptive to slowing activity data,” Taylor Nugent, a markets economist at NAB in Sydney, wrote in a client note.
The dollar slipped 0.22 percent to 132.925 yen, heading back toward the six-week low of 132.505 reached on Friday.
The currency pair is extremely sensitive to changes in US long-term Treasury yields, with the benchmark 10-year hovering around 2.67 percent after sliding to the lowest since early April at 2.618 percent at the end of last week.
The euro, however, edged 0.07 percent lower to $1.0218, continuing its consolidation near the middle of its range over the past week and a half.
