FOREX-Dollar eases after hitting highest in two weeks, US job data looms

dollar edged down on Monday but remained within striking distance of its highest level in almost two weeks as investors' focus moved to a US jobs report due at end of this week.

US payrolls, due on Friday, will be crucial after Federal Reserve chair Jerome Powell pivoted from a battle against inflation to a reiness to guard against job losses.

Analysts say job figures will determine magnitude of Federal Reserve's expected rate cut. Markets have alrey priced in for weeks a cut of 25 basis points.

greenback h earlier vanced to its strongest since Aug. 20, buoyed by a rise in long-term Treasury yields to highest since mid-August as inflation data pointed to a smaller rate cut.

U.S. gross domestic product figures also indicated ecomy was on a solid eugh footing to give Federal Reserve room to be less aggressive in easing its policy.

Trers currently see a 33% chance of a 50-bps Fed rate cut this month, while fully pricing in a quarter-point cut. A week earlier, expectations were 36% for larger reduction.

"se days, it is all about ecomic figures," Athanasios Vamvakidis, global he of forex strategy at BofA, said.

"We expect dollar to weaken in second half of this year, but market shouldn’t get too excited about it," he ded, flagging a euro target at $1.12.

" U.S. ecomy is slowing but is still doing much better than rest of world."

dollar index measure against six major peers weakened by 0.08% to 101.67, after hitting 101.79, a level t seen since Aug. 20.

It sank as low as 100.51 last week for first time since July 2023 after Fed Chair Powell sent a strong mess that easing campaign would begin at upcoming policy meeting.

euro firmed 0.2% to $1.1060, after hitting $1.1043, its lowest since Aug. 19.

On political front in Europe, Alternative for Germany (AfD) was on track to become first far-right party to win a regional election in Germany since World War Two, projections showed, giving it unprecedented power even if or parties are sure to exclude it from office.

" only clear lessons are that far-right AfD continues to resist temptation of power until y get an outright majority," Christian Schulz, deputy chief European ecomist at Citi.

Some investors worried that a political stalemate in Berlin and Paris could prevent Europe from moving forward integration initiatives which could boost growth and make Europe able to play a bigger role in global affairs.

Money markets reduced ir bets on rate cuts from European Central Bank as August services inflation remained sticky and ECB policymakers provided clues about ditional monetary easing after a widely expected September rate cut.

y have priced in 59 bps worth of rate cuts by year-end - implying two 25-bps moves and a 36% chance of a third cut - from 67 bps right after release of German inflation data last week and from 70 bps in mid-August.

N-FARM PAYROLLS

A U.S. public holiday on Monday me for a slow start to week for dollar, analysts said, but following days will see a stey flow of macroecomic data that culminates with n-farm payrolls on Friday.

Ecomists surveyed by Reuters expect dition of 165,000 U.S. jobs in August, up from an increase of 114,000 in previous month.

Analysts said data at around consensus forecasts were consistent with a soft landing and Fed easing its policy by 25 bps this month.

"With figures at or below 100,000, we will see risks of a hard landing and market pricing in a higher chance of a 50 bps rate cut," BofA's Vamvakidis said.

dollar rose 0.40% to 146.74 yen.

Analysts argued it would be hard to see dollar rally against yen at a time when Fed is about to cut rates.

Treasury bonds won't tre on Monday due to U.S. holiday, but 10-year yield stood at 3.9110% following a 4.4-bp rise on Friday.