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Dollar eases vs euro as eventful week kicks off

Published 04/03/2024, 01:49
Updated 04/03/2024, 19:22
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

By Saqib Iqbal Ahmed

NEW YORK (Reuters) -The dollar slipped against the euro on Monday, ahead of this week's news on Britain's budget, a European Central Bank meeting, U.S. jobs data and important political moments in China and the U.S.

Investors also eyed Bitcoin, which rose to a more than two-year peak above $65,000 after a quiet weekend, pushed higher in recent weeks by big flows into cryptocurrency exchange-traded funds, most notably in the United States. Bitcoin was last up 6.39% at $66,603.

The euro rose 0.15% to $1.08565, while the dollar index, which measures the currency against six major peers, was down 0.03% at $103.83. The Japanese yen fluctuated around the closely watched 150-per-dollar level. The dollar was last up 0.28% at 150.555 yen.

Most major currency pairs stuck close to recent trading ranges, as traders shied away from big directional bets ahead of this week's host of potentially market-moving events.

"FX markets are - once again - operating with an abundance of caution ahead of lots of new info this week," said Helen Given, FX trader at Monex USA in Washington.

"No one wants to get stung on any surprise, so I'd be surprised if flows don't remain muted in the front half of this week," she said.

In the United States, Federal Reserve Chair Jerome Powell will testify before lawmakers on Wednesday and Thursday. U.S payrolls data are due on Friday, with forecasts pointing to a still-solid rise of 200,000 jobs after January's barnstorming 353,000 jump.

"Payrolls could be the bigger mover as Powell is likely comfortable with current market pricing for Fed cuts, while if we get another strong payrolls after the last blowout report that could affect market expectations (for Fed policy)," said Lee Hardman, senior currency analyst at MUFG.

At the start of 2024, markets were pricing in substantial interest rate cuts early this year, but traders have since reduced such bets.

Pricing in derivatives markets now reflects expectations the first Fed cut will come in June, with three to four 25 basis point cuts this year, not far from the Fed's projections published in December.

The Fed is under no urgent pressure to cut rates given a "prospering" economy and job market, Atlanta Fed President Raphael Bostic said on Monday.

Still, some market participants think the dollar's recent gains means further gains may be limited. The dollar index is up 2.4% for the year.

"The dollar is in fact running out of room to run up further against most G10 currencies," Monex's Given said.

"A lot of the negative economic news out of Europe and the UK has already been priced in by markets, and the story is the same for positive news out of the US," she said.

This week also sees Super Tuesday, the biggest day on the calendar of U.S. presidential primaries.

Sterling was up 0.32% against the dollar at $1.2693 ahead of the British budget, due on Wednesday. Finance Minister Jeremy Hunt has been trying to dampen speculation about big pre-election tax cuts.

Elsewhere, the European Central Bank (ECB) meets on Thursday. Most ECB policymakers have been cautious about suggesting that they will be cutting interest rates soon.

On Monday, the Swiss franc jumped briefly after Swiss February inflation came in a fraction higher than expected at 1.2% compared with the previous year, though still below January's level and well within the Swiss National Bank's 0-2% target range.

© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

The currency, however, soon gave up those gains and versus the franc, the dollar was up 0.22% at 0.88495 francs.

The Australian dollar was down 0.2% with traders awaiting local gross domestic product data Wednesday. Given Australia's close economic links with China, the currency will also be shaped by China's annual parliament meeting, which begins on Tuesday and at which authorities will announce the GDP goal and are expected to unveil moderate economic stimulus plans.

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