LONDON (April 3): The US dollar edged up in European trading on Monday as investors shrugged off a lack of motives to buy it last week and awaited more clarity on the strength of the US economy and pace of future interest rate hikes.
After wobbling in Asian trading hours, the dollar index, which measures the greenback against a basket of major currencies, ticked 0.2% higher in morning European trade.
It hit a day's high of 100.53, holding well above its fourth month low of 98.85 hit last week in the wake of US President Donald Trump's failure to get a healthcare reform bill passed in March.
"I think it's fair to say we have a little bit of softness creeping in largely on the back of some of the slightly less hawkish comments from Dudley, but we have seen a slight uptick," said Rabobank currency strategist Christian Lawrence in London, referring to comments by New York Fed President William Dudley.
"But the real focus is going to be in the week ahead given how much data we have coming out ... which of course is absolutely key in trying to assess whether we will see another hike from the Fed in June."
Investors will look at this week's non-farm payrolls report closely. Economists polled by Reuters predict the US economy will have added 180,000 jobs in March.
A spate of mixed US economic data on Friday reinforced the US Federal Reserve's view that the economy is growing at a steady but not rapid pace.
Speculators reduced bullish bets on the US dollar for the first time in four weeks in the week ended March 28, according to Commodity Futures Trading Commission data released on Friday and calculations by Reuters.
Investors also parsed comments from Fed officials on Friday, some of which pressured the greenback. Markets are currently pricing in more than a 50% chance that the central bank will hike interest rates at its June meeting, the second of the three increases expected this calendar year.
New York Fed's Dudley said the central bank could begin trimming its bond portfolio this year — earlier than many economists expect — but also said that it was in no rush to tighten monetary policy.
St. Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari also said on Friday they expect rate increases this year, but both were cautious about the US economy.
"Neither Bill Dudley, New York Fed President and the godfather of monetary policy doves, nor James Bullard, St. Louis Fed President and unconventional mastermind of the FOMC, provided new momentum for the market regarding the Fed outlook over the past few days," Commerzbank analysts wrote in a note to clients.