The US dollar traded near a two-week low on Monday as investors scaled back expectations for further Federal Reserve interest rate hikes following a notably weak payrolls report. The dollar index (DXY), which measures the greenback against a basket of six major currencies, hovered around 100.9–101.0 during Asian trading, having posted its biggest weekly decline since April.
Weaker payrolls dent rate hike expectations
The Labor Department's June employment data showed a sharp slowdown in job creation, prompting traders to reduce bets that the Fed would raise rates again this year. The CME FedWatch tool still shows a 77.3% probability of additional tightening by year-end, but the softer payrolls figure has tempered hawkish sentiment and weighed on the dollar.
OCBC strategists, however, pointed to the drop in the US unemployment rate as a sign that the labor market remains tight. They argued that this should keep expectations for further Fed tightening intact, highlighting the uncertainty surrounding the central bank's next move.
Euro, sterling firm; yen and won in focus
The euro strengthened to $1.1435, near its strongest level in two weeks, while sterling held firm at $1.3351. The Japanese yen remained under close watch, hovering at 161.57 per dollar—not far from last week's 40-year low of 162.84—as markets braced for potential intervention by Tokyo. A brief surge in yen buying on Thursday had stoked intervention fears, though analysts remain skeptical about lasting support.
Meanwhile, the South Korean won strengthened slightly on the first day of historic 24-hour onshore spot dollar-won trading, changing hands at 1,534 per dollar. The broader currency environment continued to be shaped by US monetary policy expectations and yen volatility.
Overall, the mixed signals—soft jobs data, stubbornly tight labor market conditions, and persistent rate hike probabilities—left the dollar under pressure while keeping currency markets on edge.
