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31/07/2021

US dollar falls from three-month high

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The US dollar fell from a three-month high last Friday. Analysts believe that the US non-farm payrolls report last month was mixed. The report shows that the overall data is healthy, but there are some weaknesses. The dollar index fell 0.375 points or 0.4 % to 92.222, previously gaining a three-month high of 92.759.

Despite a soft US dollar on Friday, it ended the week on a positive note, with an 0.42 % gain. According to the report, the US dollar traded higher on the expectation of a robust jobs number.

Data showed that US nonfarm payrolls beat expectations, increasing by 850,000 jobs last month after rising by 583,000 in May. However, the unemployment rate rose to 5.9% from 5.8% in May, while the closely watched average hourly wage rose by 0.3% last month, lower than the widely expected 0.4%.

“The report is strong, and the trend is correct,” told Analysts. This should strengthen the US Federal Reserve to start reducing asset purchases as soon as possible this should be good for the dollar.

Since the Federal Open Market Committee (FOMC) formulated the Fed policy last month, to the surprise of the market, it pointed out that it may tighten the policy earlier than expected to curb inflation, so the US dollar has strengthened sharply.

The bigger picture is that the greenback has extended its post-FOMC rally against the other major currencies this week,” Capital Economics senior markets economist Jonas Goltermann said. “We expect it to make further headway, provided that the US data continue to come in strong.”

Data showed that the US dollar cut losses as US Factory orders rose 1.7% in May after falling 0.1% in April. Economists polled by Reuters predicted that factory orders would rise 1.6%. Orders increased 17.2% year over year.

Despite the fall, TD Securities said in a research note that the US dollar is not looking to be at the start of a significant correction.

“Beyond the initial ‘sell the fact’ reaction that appears to be underway, we think the overall tone of the report remains positive. After two consecutive ‘disappointments,’ the June data offers reassurance that the US economic rebound is on track,” the Canadian bank said.

Source: The Economic Times

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