LONDON: The safe-haven dollar fell on Monday as risk sentiment improved on hopes China’s policy stimulus might stabilise the economy, while US jobs data boosted bets the Federal Reserve could be at the end of its rate hike cycle.
With US markets closed on Monday, liquidity is likely to be thin and traders hesitant to place large bets. The dollar, against a basket of currencies, inched 0.15% lower to 104.08, but remained close to the two-month peak of 104.44 it touched on Aug. 25.
The index gained 1.7% in August, snapping a two-month losing streak. China stepped up measures to boost the country’s faltering economy, with Beijing planning further action including relaxing home-purchase restrictions. The China-sensitive euro was up 0.25% at $1.0799, just off a 10-week low touched last week against the dollar. The single currency has weakened almost 12% this summer.
Markets are pricing in a 93% chance of the Fed holding steady on rates this month, and over a 60% probability of no more hikes this year, the CME FedWatch tool showed.
The euro was untouched by European Central Bank President Christine Lagarde saying on Monday that central banks must pin inflation expectations at their targets at a time when changes in labour and energy markets as well as geopolitical turmoil are causing price swings.
Sterling was up 0.34% at $1.2633 after revised British data published on Friday showed the economy recovered faster from the pandemic than previously thought.
The Canadian dollar slipped 0.07% to 1.359 per dollar ahead of the Bank of Canada’s policy meeting this week, with the central bank expected to hold rates. Looking ahead, investor focus will be on a number of Fed officials due to speak this week for clues on what the US central bank will do at its next policy meeting on Sept. 19-20.
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