By Brigid Riley
TOKYO (Reuters) – The dollar started the week on shaky ground on Monday as markets took note of cautious comments from U.S. Federal Reserve Chair Jerome Powell while awaiting a key jobs report that would bolster the outlook for the U.S. could affect interest rates.
Bitcoin was in the spotlight this morning in Asia, hitting $40,000 for the first time in over a year.
Powell said on Friday it was clear that U.S. monetary policy was slowing the economy as expected, with the federal funds rate “well in restrictive territory.”
While Powell reiterated that the Fed is ready to tighten monetary policy further if appropriate, traders were convinced that the rate hike cycle was over.
Markets have priced in a 60% chance of a rate cut by the March meeting, up from 21% just over a week ago, according to the CME's FedWatch tool.
The U.S. dollar index, which tracks the currency against six major counterparts, was last hovering around Friday's close at 103.28.
The U.S. data remains the “key driver” of G10 currencies, making nonfarm payrolls the “key risk event” this week, said Kyle Rodda, senior financial markets analyst at Capital.com. The widely watched jobs report for November will be released on Friday.
“What we are seeing is the pricing out of US economic exceptionalism, compounded by an unwinding of excessive long positioning in the US dollar.”
That means dollar pairs could continue to get a boost depending on U.S. economic data, Rodda said.
Against the yen, the dollar settled at 146.58 yen, after falling to 146.24 earlier in the session, its lowest level since September 11. The yen has recently moved away from its near 33-year low of 151.92 per dollar hit in mid-November.
The Australian dollar rose to a new four-month high of $0.669 against the greenback, while the kiwi rose to $0.6222, its highest since late July.
The story goes on
Sterling was last trading at around $1.2682, off a three-month high against the greenback of $1.2733 hit last week.
Currency markets could also be influenced this week by speeches from several European Central Bank officials ahead of a series of economic data from the region, including revised third-quarter gross domestic product data for the euro bloc on Thursday.
Data last week showed that euro zone inflation fell to 2.4% in November, adding fuel to bets that the ECB will cut interest rates faster than the bank suggested.
The euro was broadly unchanged at $1.0874 on Monday, after slumping to as low as $1.0829 in the wake of last week's inflation data.
President Christine Lagarde is expected to give a speech later on Monday.
“Lagarde will certainly welcome last week's CPI report for the euro zone, but I doubt she will be considering ECB interest rate cuts just yet,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia, adding that the labor market in the Eurozone is still tight.
Elsewhere in the cryptocurrency space, Bitcoin hit $40,000 for the first time in nearly a year and a half on bets that U.S. regulators will soon approve Bitcoin exchange-traded funds.
(Reporting by Brigid Riley; Editing by Shri Navaratnam)
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