The US Dollar Index (DXY), which measures the US Dollar against a basket of six major currencies, edged higher during Asian trading hours on Monday.
The index traded around the 101.00 level after remaining largely unchanged in the previous session.
Market participants continued to assess the outlook for US monetary policy.
Expectations of further Federal Reserve interest rate hikes later this year helped support the Greenback, even as recent economic data painted a mixed picture.
Fed expectations support the Dollar
The US Dollar remained resilient as traders continued to price in the possibility of additional interest rate increases before the end of the year.
According to the CME FedWatch tool, financial markets are currently pricing in a 77.3% probability of Federal Reserve interest rate hikes by year-end. That expectation has continued to provide support for the US currency.
At the same time, easing global inflation pressures have also shaped market sentiment.
The moderation in inflation has been supported by the return of normal oil shipping volumes through the Strait of Hormuz, reducing concerns over supply disruptions.
Investors are now looking ahead to a series of key US economic releases that could influence expectations for future monetary policy.
OCBC strategists see the labour market remaining tight
Despite the weaker payrolls report, OCBC strategists said the decline in the US unemployment rate continued to point towards a tight labour market.
According to the strategists, the lower unemployment rate should help keep expectations for further Federal Reserve tightening intact.
Their assessment suggested that markets may still have to consider the possibility of additional policy action from the US central bank despite softer employment growth.
The differing interpretations of the latest labour market data highlighted the uncertainty surrounding the Federal Reserve’s next policy move.
Yen stays in focus as intervention concerns persist
The Japanese yen remained one of the most closely watched currencies in the market.
It traded at 161.57 per US dollar.
That was not far from the 1986 low of 162.84 reached last week.
Traders continued to monitor the possibility of intervention by Japanese authorities. Concerns intensified after a sudden surge in buying briefly lifted the yen on Thursday.
Despite the market’s focus on possible official action, analysts questioned whether any intervention by Tokyo would provide lasting support to the Japanese currency.
The continued weakness of the yen kept investors cautious as they assessed the likelihood of further volatility in the foreign exchange market.
South Korean won begins historic trading phase
South Korean won strengthened slightly on the first day of its historic 24-hour onshore spot dollar-won trading.
The currency was trading at 1,534 per US dollar.
The development marked the beginning of round-the-clock onshore spot trading for the dollar-won market.
At the same time, broader currency movements continued to be driven by expectations surrounding US monetary policy and developments in Japan.
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