By Hideyuki Sano
TOKYO (Reuters) – The dollar remained buoyant on Tuesday, pushing the euro to a four-month low as a series of strong U.S. labor figures solidified expectations that the U.S. Federal Reserve could soon begin to cut back. its massive stimulus fueled by the coronavirus.
The prospect of a reduction in Fed bond purchases pushed US bond prices lower, raising their yields and hurting other safe-haven assets that had benefited from low yields on US debt. like the Swiss franc and gold.
The Swiss franc has lost around 1.6% during the last two sessions against the dollar to trade at 0.9196 francs to the dollar.
The franc weakened even against the single currency at 1.08045 per euro, reversing its rise earlier this month to a nine-month high of 1.0720.
Gold licked its wounds at $ 1,736.5 per ounce, having lost 4% in the last two sessions and briefly dipping to just $ 1,667.6 on Monday, its weakest level since April 2020.
The euro fell to a four-month low of $ 1.1732 and last stood at $ 1.1739.
“The market is modifying prices from the Fed’s gradual reduction. It has only begun and I expect the market tightening to continue. The market is likely to test the euro low so far this year (of $ 1.1704 marked on March 31), “said Jun Arachi, senior strategist at Rakuten Securities.
The dollar’s widespread rally came as U.S. Treasury yields soared to three-week highs as surprisingly strong job openings, plus better-than-expected job earnings in July, added on. to the narrative of an improving labor market.
Vacancies, a measure of job demand, soared by 590,000 to a record 10.1 million on the last day of June, the U.S. Department of Labor reported in its Monthly Vacancy and Job Rotation Survey (JOLTS). .
That followed Friday’s non-farm payroll report that showed jobs increased by 943,000 in July, up from the 870,000 forecast by economists in a Reuters poll.
Federal Reserve Bank of Atlanta Chairman Raphael Bostic, the Fed’s first speaker after that employment data, said Monday that he is considering the fourth quarter for the start of a gradual reduction in bond purchases, but it is open to an even earlier move if the labor market keeps pace. recent torrid pace of improvement.
The chairman of the Federal Reserve Bank of Boston, Eric Rosengren, was equally frank, saying that the US central bank should announce in September that it will begin reducing its $ 120 billion in monthly purchases of Treasuries and bonds. mortgages in the fall.
U.S. consumer inflation data to be released on Wednesday will be investors’ next focus, as Wall Street expects annual core inflation to decline to 4.3% in July after skyrocketing to a high of three decades of 4.5% in June.
The dollar held firm against the yen at 110.32 yen, close to its highest level in about two weeks.
“We probably need to see US bond yields go much higher for the dollar to test its previous high above 111 yen,” said Minori Uchida, chief currency analyst at MUFG Bank.
The British pound fell to $ 1.3846, although the British currency held firmer against the euro, holding at £ 0.8474 after hitting a 1-1 / 2-year high of 0.8461 on Monday.
The Australian dollar hit $ 0.7331, close to its 4-month low of $ 0.72895 touched last month, while offshore was near a week-long lows at 6.4845 per dollar.
The New Zealand dollar also fell to $ 0.6975 from last week’s high near $ 0.71, but expectations of a rate hike by the country’s central bank next week propped up the currency against many others. rivals.
Elsewhere, bitcoin fell 1.3% to $ 45,711, having hit its highest since mid-May on Monday.
Ether lost 1.8% to $ 3,111.