As the focus shifts to employment data, the U.S. dollar has a solid start Reuters

Sano Hideyuki

TOKYO (Reuters)-After lower-than-expected inflation data released last week, investors turned their attention to the US labor market. The dollar remained strong on Monday, which hardly alleviated concerns about the Federal Reserve’s cuts in monetary stimulus.

The dollar index against six other major currencies rose 0.1% to 91.870, rebounding from a low of 91.524 hit after the release of inflation data on Friday.

The euro fell 0.1% to 1.1923 US dollars against the US dollar as it struggled to return to the US$1.20 level, while the US dollar hovered at 110.67 yen, not far from Wednesday’s 15-month high of 110.105.

The US Personal Consumption Expenditure (PCE) price index (excluding the volatile food and energy components) rose 0.5%, lower than the expected 0.6% increase.

“Nevertheless, the core PCE increased by 3.4% year-on-year in May, which is the largest increase since 1992. If the Federal Reserve normalizes (policy) sooner, the market will remain cautious,” said an analyst at Maybank Singapore on Monday. Said in a report.

Signs of a tight labor market have also caused many investors to worry about wage-driven price pressures. Among a series of economic indicators this week, Friday’s employment data is a key focus-economists expect to add 675,000 jobs.

“According to the results of employment data, the market may begin to digest the possibility of raising interest rates next year,” said Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities.

The December 2022 federal funds rate futures are almost fully priced to raise interest rates by a quarter of a percentage point before the end of next year. Speculators last week reduced the value of bets or short bets against the US dollar to the largest in six months.

The general sentiment surrounding the continued economic recovery is also solid, because after President Joe Biden withdrew the threat of vetoing the measure, the Republican Senate infrastructure deal negotiators were optimistic about a bipartisan bill worth 1.2 trillion dollars, unless one A separate Democratic spending plan also passed Congress.

If the employment data passes unexpectedly, the U.S. dollar will fall back into a downward trend.

Mitsubishi UFJ Financial Group analysts Derek Halpenney and Lee Hardman said in a report: “Now that the dust has settled, the reality is that US interest rate hikes are still not enough to trigger a continuous reversal of inflationary transactions and ( a) The dollar is strengthening.”

They said: “The latest non-farm payrolls report will provide insight into how long the labor market will take to fully recover.” “If there are no obvious upside surprises, the recent dollar gains should be further reversed.”

Elsewhere, cryptocurrencies have rebounded from weekend lows, but are falling for the second consecutive month. The final transaction price was US$34,281, while the price of Ether was US$1,973, not far from Tuesday’s three-month low of US$1,700.

The British financial regulator said last week that Binance, one of the world’s largest cryptocurrency exchanges, was unable to conduct any regulated activities and issued a warning to consumers about the platform.