Dollar extends post-payrolls pullback

FOREX Signals – SINGAPORE (Reuters) – The dollar fell on Tuesday and its Australian and New Zealand peers led gains as traders wagered on a patchy U.S. job market holding interest rates low while the rest of the world reopens.

Dollar extends four-month high

Sterling rose as much as 0.6% to a one-week high of $1.3898 as markets looked forward to England becoming the first major country to formally start living with the coronavirus by dropping COVID-related curbs in a fortnight’s time.

The euro ticked 0.2% higher to $1.1890 despite an unexpected slump in German industrial orders. The yen rose by about the same margin to 110.80 per dollar and the New Zealand dollar jumped nearly 1% to $0.7104 after a strong business survey pulled forward rate hike expectations.

Forex Signals – Dollar set to extend decline

Dollar extends post-payrolls pullback

The Aussie rose as much as 1.2% at one point to $0.7599, even as Reserve Bank of Australia Governor Philip Lowe struck a dovish tone in a news conference after holding rates and paring bond purchases, mostly as expected.

The moves extended a dip in the dollar since U.S. labour market data last week that was upbeat but not so strong as to risk bringing forward the day when the Federal Reserve might start tapering its asset buying or planning imminent rate rises.

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“I think the market has just felt a bit of relief,” said Bank of Singapore currency analyst Moh Siong Sim.

“Now that we’ve got (U.S. jobs data) out of the way, we’re seeing a little bit of dollar pullback. I don’t think it’s going to be a big dollar pullback, but the next catalyst to worry about – U.S. jobs or inflation – is still some time away.”

Sterling gains dollar on back foot

In the meantime, market pricing is shifting quite quickly in New Zealand. Bonds were reeling and the kiwi leapt above its 20-day and 200-day moving averages, after a business survey showed a sharp improvement in mood and a warning on labour supply.

Dollar extends post-payrolls pullback

With closed borders and a COVID-free population, businesses said times were good and they had raised prices, but they also had never found it so hard to find workers – prompting economists at two local banks to forecast rate hikes in November.

“It is very clear that record amounts of monetary stimulus are no longer needed to support the economy and inflation risks are getting too high for comfort,” said ASB economist Jane Turner in a note as the bank brought forward forecast hikes from May.

Dollar struggles to extend rally

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Dollar Falls as U.S. Yields Slip

“The Fed is not the only hawk in town,” said Maybank senior FX strategist Christopher Wong. “Australia is in much better position than expected – (it) was a positive assessment.”

Elsewhere a sharp rise in oil prices following abandoned talks among producers about output levels lent support to exporter currencies such as the Norwegian crown and Canadian dollar.

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On the horizon later in the day – when U.S. markets return from a holiday – is a U.S. services survey. Then on Wednesday the minutes from the Federal Reserve’s June meeting, in which it made a hawkish projection for rate hikes in 2023, might offer more insight to the shift in thinking.