U.S. jobs report leads to four -month high against the dollar

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On Monday, the euro hit a four-month high against the dollar, reversing a recent fall after strong labour market data encouraged investors to bring forward their bets on the Federal Reserve reducing its pandemic-era stimulus.

The Fed cut a huge amount of foreign currency to the euro from Friday, when the U.S. jobs report encouraged bets that the Fed could start trimming asset purchases this year and raise rates as soon as 2022. Many of them have even predicted that the European Central Bank will hint at any slimming stimulus any time soon.

At 1045 GMT, the price pair had settled at $1.1754.

Against a basket of currencies, the dollar was below 92.811 and remained near four-month highs of 93.194.

The dollar also lifted after a 0.4% rally at the end of last week as high as 110.37 yen.

Following the jobs report, the benchmark 10 - year Treasury yield jumped to 8.30% on Friday to reach a two-week high of 1.307%. On Monday it gave some of those gains to trade at 1.2817%, down 6 basis points.

A strong U.S. employment report on Friday triggered a jump in U.S. bond yields, supporting the U.S. dollar higher, said Alvin Tan, currencies strategist for RBC Capital Markets.

The summaries for May and June were also revised up.

Analysts noted that market participants had pushed forward the Fed's tapering announcement to as early as Jackson Hole symposium in late August.

As markets digest the increasingly-proximate reality of Fed policy recalibration, the potential for accompanying risk asset and commodity price 'normalization' could emerge as a separate short-term driver of USD gains against cyclical FX, Ben Randol, currency strategist at Bank of America, wrote in a research note.

There were signs of the immediate dollar increase fizzling, however, with markets generally quiet as investors warily watched a rise in COVID 19 cases in Asia. Sharp falls in gold prices and oil prices also weighed on sentiment.

Sterling gained higher to $1.3884 after earlier trading at $1.3856.

The commodity-linked Australian Dollar was stabilised while the Canadian dollar weakened as weaker oil prices hurt the currency last week.