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An investor’s focus on U.S. jobs data later this week for indications on stimulus reduction timing pushed the dollar to a three-week low on Tuesday against a basket of major currencies. Federal Reserve Chair Jerome Powell’s statements at the Jackson Hole conference on Friday that the U.S. central bank could reduce the size of its bond-buying programme this year, but did not provide a specific schedule, have put the greenback on the back foot since.
Analysts say the U.S. payrolls data due this Friday will be eagerly scrutinized. “Powell made clear on Friday that the Fed believes the ‘substantial further progress’ criteria has been met for inflation but not for employment and hence the jobs data will continue to be key for policy expectations,” analysts at MUFG said in a note.
Traders predict that Tuesday’s activity will also be influenced by the end-of-month flows from firms for their import and export operations. This is the lowest level since August 6 as the dollar index fell a quarter of a percentage point to 92.456.A three-week high of $1.18315 was reached by the euro against a generally lower dollar, up 0.3 percent. A two-week high of $1.38010 was reached by the pound sterling before it fell down below that mark. The yen stayed unchanged at 109.85 yen to the dollar, a slight increase over the previous session.
In the wake of Prime Minister Jacinda Ardern’s partial relaxation of lockdown restrictions outside of Auckland, the New Zealand currency gained 0.9 percent to $0.70560.
However, the offshore Chinese yuan was mostly unchanged after weak factory and service sector surveys. “The drop in the non-manufacturing PMI reflects the impact of the coronavirus. But the infections in China has already peaked and dwindled,” said Ei Kaku, senior strategist at Nomura Securities.
In cryptocurrencies, bitcoin gained 1.6% to $47,752, regaining some of the previous day’s losses.