Geopolitical risks and softer US employment figures lift the USD as Fed rate hike bets fade ahead of inflation reports.
The US Dollar Index (DXY) rose above 99.70 in Asian trading Monday, reversing prior losses as risk aversion gripped markets. Escalating US-Iran tensions, particularly around the Strait of Hormuz, fueled demand for the safe-haven currency despite reported progress in Oman-mediated talks.
July’s Nonfarm Payrolls fell by 23,000, missing expectations, while June’s figures were revised sharply lower to 20,000 from 57,000. The unemployment rate dipped to 4.1%, but the weak jobs data reduced the probability of a September Fed rate hike to 46%, down from 67% a week earlier.
Markets reacted with a bull steepening in rates, as softer data eased concerns over a reacceleration in inflation. Investors now await upcoming inflation reports for further policy clues.