The index advanced more than 0.3% on Friday after data indicated that US job growth had picked up in August. Wages also recorded their largest annual gain in more than nine years. Strong data further supported the prospect of faster rate rise by the Federal Reserve, boosting demand for the dollar. The Def is also expected to certainly raise rates a third time this year in late September.
The dollar index, which measures the greenback against a basket of six currencies, was basically flat at 95.381, not far off from a three-week high of 95.737 hit on Tuesday last week.
On Friday, US President Donald Trump had warned that he was ready to slap tariffs on virtually all Chinese imports into the United States – threatening duties on another $267bn worth of goods, in addition to the $200bn that is already facing the risk of duties.
Masafumi Yamamoto, chief currency strategist at Mizuho Securities stated: “If there are any signs that the US economy is finally hit by its own protectionist moves, then I think that’s the start of full-blown risk aversion.”
“This will at least lead to the weakness of the dollar against the yen,” Yamamoto further stated. He warned that markets hadn’t yet fully priced the impact of US tariffs on virtually all imports from China. Investors have been waiting for a fresh salvo to be fire in the US-China trade war after a public comment period for proposed US tariffs on a list of $200bn worth of Chinese imports ended last week.
The dollar did however, edge lower against the safe-haven Japanese yen and the Swiss franc on Monday, trading at 110.94 yen and $0.9693 respectively. The yen strengthened as revised gross domestic product for April-June showed Japan clocked an annualised growth rate of 3%– much faster than a preliminary estimate of 1.9% growth last month.
The euro was 0.07% higher at $1.1557, paring some losses after falling more than a percent during the previous session in the wake of the US job data.
The Swedish crown was about 0.1% weaker against the euro and dollar as Sweden headed for a hung parliament following Sunday’s elections.
The Australian dollar was 0.06% higher at $0.7110, coming off a more than 2-1/2-year low of $0.7097 touched in early trade as trade-related tensions continued to weigh on commodity-linked currencies.
China’s offshore yuan strengthened 0.1% to 6.867 per dollar. It weakened more than 0.3% during the previous trading session on fears that the US-China trade conflict may undergo a possible escalation.