Dollar Pauses on Jobs-Led Rally as Traders Await Inflation Data

(Bloomberg) -- The dollar stalled after Friday's rally as traders await inflation data following a strong jobs report.

The greenback fell against most of its Group-of-10 peers while Treasury yields were little changed after climbing four basis points Friday. The Bloomberg Dollar Spot Index jumped on Friday by the most since January after data showed U.S. employers added 209,000 new jobs in July, beating the median estimate of 180,000.

“The Fed's outlook for a balance sheet reduction to start in September and a rate hike to take place in December offered scope for the dollar's rebound near-term,” said Junya Tanase, chief foreign-exchange strategist at JPMorgan Chase & Co. in Tokyo. “On the other hand, the dollar remains in an overall weakness trend as other countries are moving toward monetary normalization, leading to an unwinding of positions that were built when the U.S. was the only country raising rates.”

• Bloomberg Dollar Spot Index is down 0.1% after rising 0.6% Friday to mark its first weekly gain in four weeks
• USD/JPY is little changed at 110.69 after adding as much as 0.9% to 111.05 on Friday
  • U.S. July jobless rate matched a 16-year low while average hourly earnings rose 0.3% m/m vs prior 0.2%
  • Core CPI is forecast to rise 0.2% m/m, which would be the best since February, according to Bloomberg survey; data due Friday 
• Leveraged funds raised net long positions in EUR, AUD, CAD while trimming net JPY short in week to Aug. 1, CFTC data showed on Friday
• “The dollar's rebound could continue for a while if CPI is solid but if U.S. yields keep rising, it could sap risk appetite and result in an unwinding of yen short positions against currencies other than the dollar, weighing on USD/JPY”: Tanase
• EUR/USD rises 0.2% to $1.1798
• AUD/USD gains 0.2% to 0.7939
  • Iron ore futures in Singapore rallies as much as 7.3%
  • China steel makers jump; Citigroup sees curbs cutting output 8%
  • “If the Aussie's trading above 80 for a sustained period of time, it actually brings rate cuts back on the agenda, rather than thinking about rate hikes,” Philip Moffitt, Asia-Pacific head of fixed income at Goldman Sachs Asset Management says in Bloomberg TV interview
  • Nikkei 225 stock average rises 0.6%

  --With assistance from Rishaad Salamat and Haidi Lun

  To contact the reporter on this story: Chikako Mogi in Tokyo at cmogi@bloomberg.net.

  To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Patricia Lui

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