Dollar near one-month high; strong payrolls, rising Chinese tensions help

Dollar near one-month high; strong payrolls, rising Chinese tensions help
Dollar near one-month high; strong payrolls, rising Chinese tensions help
© Reuters

By Peter Nurse – The U.S. dollar rose in early European trade Monday, boosted by raised tensions between China and the U.S., while Friday’s strong payrolls prompted traders to reassess the extent of the Federal Reserve’s likely interest rate tightening.

At 03:25 ET (08:25 GMT), the , which tracks the greenback against a basket of six other currencies, traded 0.3% higher at 103.090, climbing near to a one-month high.

The index is maintaining the positive tone seen after Friday’s strong employment report, which recorded a surge in U.S. in January.

This suggests that the U.S. has enough headroom within the labor market to keep raising interest rates, which benefits the dollar directly as well as potentially weighing on global growth, to the benefit of the safe haven greenback.

This represents something of a U-turn after the index had earlier last week slumped to the lowest since April on expectations the Fed could soon rein in the pace of tightening.

There are a number of Fed speakers this week, with Chair the highlight. Their comments will be carefully studied for clues of the likely extent of the central bank’s monetary tightening.

Adding to the safe haven demand for the dollar Monday are the deepening U.S.-China tensions after an alleged Chinese spy balloon was shot down by the U.S. airforce over the weekend.

Elsewhere, rose 0.6% to 131.98, with the yen weaker following a local report indicating that Bank of Japan Deputy Governor Masayoshi Amamiya was in consideration to lead the central bank after incumbent governor Haruhiko Kuroda.

Amamiya is seen as a dovish candidate, and his appointment would be widely construed as resulting in a continuation of the bank’s ultra-loose monetary stance.

fell 0.2% to 1.0777 despite rising by a larger than expected 3.2% on the month in December, after an upwardly revised drop of 4.4% in November.

fell 0.1% to 1.2040, having touched a one-month low of 1.2031 earlier on Monday. The U.K. is to release data on Friday, which is expected to show an economy flirting with recession.

rose 0.1% to 0.6924, fell 0.2% to 0.6320, while rose 0.1% to 6.7806, with the yuan weakening on the rising political tensions with the U.S.

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