The dollar started trade in Asia with a bid tone, having reversed some of its post-payrolls losses as investors were quick to rebuild long positions amid an absence of major drivers.
It was back near 115.00 yen and not far off Friday’s seven-year peak of 115.60, after recovering from a dip to 113.86. The greenback also climbed on the euro, which eased to $1.2421 from above $1.2500.
That caused the dollar index to bounce to 87.820 and within striking distance of a four-year high of 88.190.
Investors had taken profits on extremely long dollar positions on Friday after headline U.S. payroll figures missed more optimistic expectations. The report, however, still painted an encouraging picture of the U.S. labor market.
“USD buyers took advantage of the post-NFP dip to build on longs,” Elsa Lignos, senior currency strategist at RBC Capital Markets, wrote in a note to clients.
“We argued that relative to anything other than rather bloated expectations, Friday’s payrolls report was a solid release and we prefer to fade USD weakness this week.”
Indeed, the closely watched nonfarm payrolls only served to highlight the much brighter U.S. economic outlook compared with Europe and Japan.
The resultant diverging monetary policy pathways between the Federal Reserve and its major counterparts have been a key driver of the dollar against the euro and the yen in the past few months.
Yet with U.S. inflation tame, commodity prices falling and global growth expectations weak, markets have resisted bringing forward the likely timing of a U.S. interest rate hike. Many analysts still see mid-2015 as a possible window for the first tightening since 2006.
For some traders, expectations for that kind of policy normalization need to heat up for more substantial dollar gains.
Boston Federal Reserve bank President Eric Rosengren on Monday repeated his call for the Fed to remain patient in raising rates until it is more certain that inflation will rise to the Fed’s target.
Monday’s bounce in the dollar caused commodity currencies to beat a hasty retreat. The Australian dollar eased to $0.8622 from $0.8684, while its New Zealand peer dipped to $0.7750 from $0.7823.
The Norwegian crown was a standout currency after inflation data at home surprised on the upside. It briefly strengthened against both the euro and dollar before giving up most of the gains.
The euro last traded at 8.4623 crowns, having fallen as far as 8.4100.
Trading in Asia is expected to be subdued with no major economic news. U.S. bond market and government offices will be closed on Tuesday for the Veterans Day holiday.
Source : Reuters
