Key facts
- The dollar eased from a two-month high after Iran announced the conclusion of its attacks on Israel.
- Strong U.S. jobs data on Friday increased bets on a Federal Reserve rate hike.
- The euro and pound edged higher against the dollar.
- The Bank of Japan is expected to raise interest rates this month.
- The European Central Bank is widely expected to raise rates this week.
The dollar eased from a two-month high on Monday after Iran stated its attacks on Israel had concluded, reducing safe-haven demand. This pause in direct confrontation lured investors into other currencies that had been dented after strong U.S. jobs data on Friday prompted traders to ramp up bets on a Federal Reserve rate rise this year.
Friday's jobs report showed the U.S. added 172,000 jobs, shifting market sentiment. Fed funds futures traders now see roughly a 40% chance of a hike by October. The euro was slightly stronger at $1.1531, hovering near a nine-week low, while the pound edged above three-week lows to $1.3390. The dollar index fell 0.07% to 100.07.
The dollar has drawn on its safe-haven credentials and the prospect of a widening U.S. rate gap, which has particularly impacted the Japanese yen. The yen strengthened 0.1% against the dollar to 160.17 per dollar, having previously erased gains made after Japan's intervention.
The European Central Bank is widely expected to raise rates this week, with another increase likely in September, as it seeks to balance energy-driven inflation against a weakening economy. The Bank of Japan is also expected to raise interest rates this month, unless a sharp escalation in the Iran war upends markets.