SINGAPORE, Sept 1 — The dollar fell today as investors looked ahead to a raft of US labour market data this week that could determine the size of an expected rate cut by the Federal Reserve later this month.
Traders were also still assessing Friday’s US inflation data and a court ruling that most of Donald Trump’s tariffs are illegal, as well as the US president’s ongoing tussle with the Fed over his attempt to fire Governor Lisa Cook.
The dollar fell 0.04 per cent against the yen to 146.98 in the Asian session, extending its monthly decline of 2.5 per cent against the Japanese currency in August.
The euro was up 0.25 per cent to US$1.1710, while sterling edged 0.14 per cent higher to US$1.3522. US markets are closed for a holiday today.
Top of investors’ radar this week will be Friday’s US nonfarm payrolls report, which will be preceded by data on job openings and private payrolls.
“Markets will pay close attention to those data releases in order to gauge the state of the labour market ... any downward surprises to the US labour market data this week will increase market expectations of a rate cut, and that will further give us clues as to whether that cut will be a normal 25-basis-point cut or an outsized 50-basis-point cut,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
Investors are currently pricing in a roughly 88 per cent chance the Fed will ease rates by 25bps at its September 16-17 meeting, according to the CME FedWatch tool.
Against a basket of currencies, the dollar eased 0.15 per cent to 97.69, having clocked a monthly decline of 2.2 per cent on Friday.
Rate expectations aside, the dollar has also been weighed down by worries over Fed independence, as Trump steps up his campaign to exert more influence over monetary policy.
A court hearing on Trump’s attempt to fire Fed Governor Cook ended on Friday with no immediate ruling on the unprecedented legal fight, meaning she will remain in place for now.
At the same time, uncertainty over Trump’s tariffs continues to linger.
US Trade Representative Jamieson Greer said yesterday the Trump administration is continuing its talks with trading partners despite a US appeals court ruling that most of Trump’s tariffs are illegal.
“I doubt it will be market-moving if tariffs are going to stay in place, and even if they are ruled to be illegal, I think Trump will find another legal avenue to implement the tariffs,” said CBA’s Kong.
In other currencies, the Australian dollar rose 0.11 per cent to US$0.6544 after earlier touching a two-week high, while the New Zealand dollar similarly advanced 0.13 per cent to US$0.5902.
The onshore yuan steadied near Friday’s roughly 10-month high and last stood at 7.1318 per dollar.
The yuan has drawn support from firm central bank fixings in the onshore market and a buoyant domestic stock market, even as China’s economy struggles to mount a solid recovery.
China’s factory activity in August expanded at the quickest pace in five months on the back of rising new orders, a private-sector survey showed today, contrasting with an official survey released yesterday that showed factory activity shrinking for the fifth straight month. — Reuters
