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Dollar rebounded as healthy US jobs fueled Fed talk

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  • The Swiss franc and gold slip with the dollar’s gains on the back of the Federal Reserve’s speech
  • The favorite of regional Fed chiefs falls in the coming months
  • The euro hits a 4-month low against the dollar

TOKYO (Reuters) – The dollar rebounded on Tuesday, pushing the euro to a four-month low, as a streak of powerful U.S. jobs numbers bolstered expectations that the U.S. Federal Reserve may soon start scaling back massive stimulus led by the coronavirus.

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The prospect of lower bond-buying by the Federal Reserve drove down US bond prices, raised their yields and hit other safe-haven assets that benefited from lower US debt yields, such as the Swiss franc and gold.

The Swiss franc has lost about 1.6% over the former two sessions against the dollar to trade at 0.9196 against the dollar.

The franc even weakened against the single currency to 1.08045 against the euro, reversing its rally earlier this month to a nine-month lofty of 1.0720.

Gold is licking its wounds at $1,736.5 an ounce, following losing 4% in the final two sessions and briefly dropping to its lowest level at $1,667.6 on Monday, its weakest level since April 2020.

The euro slipped to a four-month low of $1.1732 and final settled at $1.1739.

“The market is re-pricing the Fed tapering. It has just started and I expect the market adjustment to persevere. The market is likely to test the lowest price of the euro so far this year (at $1.1704 on March 31),” said John Arashi, chief strategist at the Fed. Rakuten Securities.

The wide dollar rally came as US Treasury yields climbed to their highest in three weeks, as surprisingly powerful jobs along with better-than-expected employment gains in July added to the labor market story.

In its monthly Job Opportunity and Employment Turnover Survey (JOLTS), the US Department of Labor said that employment, a measure of labor demand, rose by 590,000 to a record lofty of 10.1 million on the final day of June. Read more

It came on the heels of Friday’s nonfarm payroll report which showed jobs increased by 943K in July, higher than the 870K economists had expected in a Reuters poll. Read more

Atlanta Fed President Rafael Bostic, the Fed’s first spokesperson following this jobs data, said Monday that he is looking to the final quarter of the year to begin tapering off bond buying, but is begin to a move earlier even if the labor market continues to rally. Recent pace of improvement. Read more

Boston Fed President Eric Rosengren has been equally vocal, saying the US central bank should announce in September that it will begin reducing its monthly purchases of $120 billion in Treasury and mortgage securities in the fall. Read more

US consumer inflation data due on Wednesday will be the next focus for investors, as Wall Street expects annual core inflation to fall to 4.3% in July following climbing to a three-decade lofty of 4.5% in June.

The dollar settled against the yen at 110.32 yen, near its highest level in nearly two weeks.

“Maybe we need to see US bond yields rise much higher for the dollar to test its previous rally overhead 111 yen,” said Minori Uchida, chief FX analyst at MUFG Bank.

The British pound fell to $1.3846 despite the British currency’s stability against the euro, and settled at 0.8474 following hitting a one-and-a-half year lofty of 0.8461 on Monday.

The Australian dollar made $0.7331, close to a 4-month low of $0.72895 final month, while the offshore Chinese yuan stood near a one-week low of 6.4845 per dollar.

The New Zealand dollar also slipped back to $0.6975 from final week’s lofty near $0.71, but expectations of a rate hike by the country’s central bank next week boosted the currency against several other competitors.

Elsewhere, bitcoin slipped 1.3% to $45,711, following hitting its highest level since mid-May on Monday.

Ether lost 1.8 percent to $3,111.

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Currency display prices at 0355 GMT

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locations in Tokyo

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Tokyo forex market information from the Bank of Japan

Editing by Shree Navaratnam and Jacqueline Wong

Our Standards: Thomson Reuters Trust Principles.


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