LONDON The dollar fell against a basket of currencies on Monday, weighed down by below-par wage growth data late last week that clouded the outlook over when U.S. interest rates are likely to rise.
U.S. short-dated yields fell and the dollar was sold on Friday after the U.S. Employment Cost Index rose just 0.2 percent in the second quarter, the smallest gain in three decades.
Against a basket of six major currencies, the dollar last traded at 97.215 .DXY =USD, down 0.15 percent on the day and well below a one-week high of 97.773 set last Thursday.
Some analysts said the dollar could draw strength from U.S. economic indicators this week, including the Institute for Supply Management’s report on U.S. factory activity due Monday and nonfarm payrolls data on Friday. ECONUS
“The dollar is still a better bet than the euro and its commodity-bloc counterparts,” said Jeremy Stretch, head of currency strategy at CIBC World Markets. “The ISM data and the non-farm payrolls data could see the impact from the employment cost index report fade by the end of the week.”
The euro climbed to $1.0990 EUR= with attention on southern European bonds as investors are poised for a day of carnage in Greece as the country opens its bourse for the first time in five weeks.
Heavy losses are expected when the market opens at 0730 GMT with a short-selling ban on stocks extended, a source at the country’s securities regulator told Reuters.
The dollar’s selloff on Friday could have been worse if not for hawkish comments from St. Louis Federal Reserve President James Bullard. Bullard, who has long called for tightening, was quoted in a Wall Street Journal report as saying the latest U.S. growth data boosts the case for a hike in September.
His comments helped the dollar pare losses late into the U.S. session on Friday. Yet U.S. Treasury yields US2YT=RR US10YT=RR still hovered near troughs hit on Friday, suggesting some doubts remained about the timing of a Fed hike.
“Overall, we continue to see the U.S. dollar staying firm and strong,” said Heng Koon How, senior FX strategist for Credit Suisse private banking and wealth management in Singapore.
The dollar was up 0.1 percent against the yen at 124.09 yen.
The Australian dollar was lower at $0.7290 AUD=D3, hurt by an official survey that showed growth at China’s big manufacturing companies unexpectedly stalled in July as demand at home and abroad weakened. The Aussie is often used as a liquid proxy for China plays.
(Additional reporting by Masayuki Kitano– Editing by Andrew Heavens)
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