Dollar declines after hitting 7-month peak Friday; Odds of Fed hike in December soar
The greenback slipped lower against the other major currencies on
Monday, as traders locked in profits after the greenback hit a huge seven-month peak on Friday after the release of strong U.S. employment data.
On Monday the dollar was lower against the euro, with EUR/USD up 0.40% at 1.0783, off Friday’s seven-month trough of 1.0701.
The greenback strengthened broadly after the Labor Department reported that the U.S. economy added 271,000 jobs last month, beating the expected 180,000 - the largest increase since December. The unemployment rate dipped to a seven-and-a-half year low of 5.0%.
The strong data increased chances for the Federal Reserve to raise borrowing costs at its December meeting, a move that would make the dollar more appealing to yield-seeking investors.
USD/JPY rose 0.22% to trade at 123.43 - the highest since August 21.
The dollar was lower against the pound and the Swiss franc, with GBP/USD adding 0.29% to 1.5097 and with USD/CHF shedding 0.4% to 1.0025, pulling away from Friday’s eight month highs of 1.0075.
Bond yields rose on Fed expectations.
Treasury yields continued to edge higher in Europe having surged on Friday. The key 2-year yield, the most sensitive to a near-term rate hike, was at a 5-1/2-year high.
German Bund yields were pushed higher too.
Portuguese government bond yields hit a 10-week high, as leftist parties agreed to form an alternative government in their attempt to oust the center-right in a vote this week. The yield (or interest rate) on 10-year Portuguese bonds has climbed from 2.67% to 2.77%, a ten-week high. That is not a major move, but a sign that investors are anxious about events in Lisbon.
There was also uncertainty in Spain, as on Monday Catalan separatists are expected to approve in the local parliament a motion saying the process to split the northeastern region from Spain has started.
