Positive U.S. Jobs Data Helped to Boost Dollar

Dollar and risk factors

The U.S. dollar rose to a four-month high versus the euro on Tuesday after upbeat U.S. jobs data bolstered the expectations that the central bank could soon start tapering its massive bond-buying program.

The 10-year Treasury yield jumped to as high as 1.336% in London trade, its highest level in more than three weeks. According to analysts, the greenback was supported by rising U.S. bond yields.

U.S. job openings reached its highest point in June while hiring increased according to the Labor Department. Several days ago, the non-farm payrolls report showed that the number of jobs increased by 943,000 in July.

The dollar index rose on Friday as well as Monday and reached an 18-day high of 93.102 at 10:18 GMT on Tuesday. At 10:54 GMT, the dollar index was up 0.1% on the day at 93.034. The index hit a four-month high versus the single currency, with the euro down 0.1% on the day at $1.17265.

Germany’s ZEW survey revealed one very fact. Investor sentiment declined for the third month in a row in August, due to the pandemic and its impact on the economy.

Dollar and U.S. consumer inflation data

Market participants are watching other data as well. They now turn their attention to U.S. consumer inflation data due on Wednesday. The inflation data could provide more cues on the timing on the Federal Reserve’s bond-purchase taper. Nevertheless, the U.S. jobs market data and inflation statistics are difficult to interpret.

Atlanta Federal Reserve Bank President Raphael Bostic made a comment about jobs data. Bostic stated that he was eyeing the fourth quarter for the start of a bond-purchase taper. But he is open to an earlier move.

President of Boston Federal Reserve Bank Eric Rosengren also made a comment. Rosengren noted that the Fed could announce in September that it will reduce asset purchases in the autumn.

In other parts of the world, risk appetite was hurt by worries about growth in China and the pandemic. The risk-sensitive Australian dollar suffered losses in recent weeks due to commodity prices. The Aussie was up 0.2% to $0.73395 at 10:56 GMT. Its counterpart from New Zealand was up 0.1% at $0.6994.

The Japanese yen and the Swiss franc both dropped 0.1% against the U.S. dollar, as demand for safe-haven currencies fell.

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