Story
Dollar Retreats from 13-Month High on Weaker US Jobs Data
Summary
The U.S. dollar pulled back from a recent 13-month peak after employment data came in softer than anticipated, reducing expectations for further interest rate hikes from the Federal Reserve. The move allowed the euro to post weekly gains and provided some relief for other major currencies.
The U.S. dollar fell from a 13-month high on Friday, poised for its first weekly loss in three weeks. The decline was prompted by U.S. employment data that was weaker than expected, leading traders to scale back bets on future interest rate hikes by the Federal Reserve. The dollar index, which measures the greenback against a basket of major currencies, was on track for a 0.8% loss for the week.
The dollar's retreat allowed other currencies to gain ground. The euro and the British pound both edged higher, with the euro set to close the week up 0.5%. Trading volumes were reportedly thin due to a U.S. market holiday. Market sentiment was also influenced by reports of progress in diplomatic talks between the U.S. and Iran held in Qatar.
Following the jobs report, market expectations for a September rate hike by the Federal Reserve have diminished, according to the CME FedWatch tool. However, analysts note that the dollar's downside may be limited. Fed Chair Kevin Warsh recently reiterated the central bank's strong commitment to its 2% inflation target, suggesting a hawkish policy stance remains a possibility amid persistent price pressures.
AdIn Asia, the Japanese yen steadied after recently touching a 40-year low against the dollar. The currency recovered some ground as Japanese officials continued to issue warnings about potential intervention in the foreign exchange market to curb speculation. While the threat of intervention has provided some support, analysts suggest that a sustained reversal would likely require a shift in underlying economic fundamentals, such as the wide interest rate gap between the U.S. and Japan.