TOKYO- The dollar struggled to regain some footing on Monday as markets took stock of cautious remarks from Federal Reserve Chair Jerome Powell and awaited a key employment report later in the week that could influence the outlook for US interest rates.
Meanwhile, bitcoin returned to the spotlight as it rose to the $40,000 level for the first time in over a year.
Powell said on Friday it was clear that US monetary policy was slowing the economy as expected, with the benchmark overnight interest rate “well into restrictive territory.”
While Powell reiterated that the Fed is prepared to tighten policy further if deemed appropriate, traders were convinced the rate-hike cycle was over.
Markets were pricing in a 60 percent chance of a rate cut by the March meeting compared with 21 percent just over a week ago, according to the CME’s FedWatch tool.
The US dollar index which tracks the currency against six major counterparts, picked up slightly to 103.33 in the Asian afternoon but still not far from Friday’s close.
US data remains the “primary driver” of the G10 currencies, making non-farm payrolls the “most important risk event” this week, said Kyle Rodda, senior financial market analyst at Capital.com. The closely watched November jobs report will be released on Friday.
“What we are seeing is the pricing out of US economic exceptionalism, compounded by an unwinding of stretched long positioning in the US dollar.”
That means dollar pairs could continue to get a boost depending on US economic data, Rodda said.
Against the yen, the dollar clawed its way back up to $146.80 yen after falling to 146.24 earlier in the session. – Reuters
