NEW YORK: The US dollar gained as oil prices increased ahead of Wednesday’s closely watched consumer price inflation report for July, after a much weaker-than-expected jobs report on Friday cast doubt on the likelihood of a near-term Federal Reserve rate hike.
Fed funds futures traders are now pricing in 48 percent odds of a hike at the Fed’s September meeting, down from 55 percent before Friday’s jobs data. Analysts say slowing job growth and easing oil prices have both contributed to the lower odds of a near-term hike.
“September was starting to look highly likely and then not only did we get a bad jobs report, but terrible revisions as well,” said Adam Button, chief currency analyst at investingLive.
Wednesday’s consumer price index data could spark another shift in expectations if it points to a reacceleration in price pressures. Producer price data on Thursday and retail sales figures on Friday will offer further clues on the path of inflation.
Oil prices have eased from recent highs on hopes that a deal to end the Iran conflict could be reached, though volatility persists as developments in the region continue to shift. Prices jumped nearly 2 percent on Monday after Iran insisted that the US must meet several demands before the Strait of Hormuz can reopen.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.15 percent to 99.76, with the euro down 0.1 percent at USD1.1546.
The Japanese yen weakened 0.75 percent against the greenback to 158.97 per dollar, on pace for its steepest daily decline against the greenback in almost five months. The currency has pared back some of its intervention-driven gains but remains well off the roughly 164 multi-decade low touched late last month.
Speculators slashed their bearish bets on the Japanese yen by the most in over 12 years, according to data on Friday from the Commodity Futures Trading Commission, reflecting the coordinated effort by Japanese and US authorities to strengthen the currency.
The data showed the net short position in the yen fell by USD8.865 billion to USD3.604 billion in the week to August 4, the largest drop in absolute terms since March 2014.
Meanwhile, speculators increased their net long position in the dollar in the latest week to the highest level since December 2022.
The Australian dollar weakened 0.13 percent to USD0.7058 before the Reserve Bank of Australia’s rate decision on Tuesday, with the central bank widely expected to hold its key rate at 4.35 percent through the rest of the year.
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