The U.S. dollar fell as investors awaited testimony from the Federal Reserve chairman ahead of the February jobs report later in the week. This will greatly impact how much the U.S. central bank raises interest rates.
The dollar index last fell by 0.1% to 104.54. Last week, the index posted its first weekly loss since January.
The Fed increased interest rates by twenty-five basis points in its two meetings last year, but a mix of lackluster economic data fueled market fears that the central bank is likely to return to its hawkish path.
Futures imply a 73% chance the Fed will increase interest rates by 25 basis points at its March meeting.
Of all the upcoming events, the most important will be salaried.
In early February, the monthly employment report for January showed strong job gains. It sustained wage inflation, which, along with strong business activity, was enough to convince investors that the U.S. central bank would have no reason to cut rates.
A look at the euro and yen exchange rates
The dollar rose about 2%, mainly at the expense of the Japanese yen, which lost about 5% against the U.S. currency.
Since the beginning of February, the euro has lost about 3% against the dollar.
Weekly futures data showed on Friday that money managers were holding out for the euro’s biggest gain in two years.
The yen was last down 0.2% at 136.02 today, ahead of Friday’s Bank of Japan governor’s final policy meeting.
If the governor ends his term with a very hawkish move, it could spell trouble for the yen, especially if U.S. yields move higher this week.
The Chinese yuan fell against the dollar. The offshore yuan fell 0.65% to $6.937, while the Australian dollar, often traded as a liquid proxy for the yuan, fell 0.5% to $0.6737.
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