Light wind in dollar's sails after bumper US payrolls

US dollar rate index news: The dollar was firm but sluggish in Asian trading on Monday as investors looked ahead to US inflation data after the big payrolls number last week, and as Treasury yields reached for December highs. US consumer price inflation for March on Wednesday and a European Central Bank (ECB) policy meeting on Thursday will be the main economic markers for the big global currencies this week.

Those follow a week of vacillation as traders watched Japanese authorities talk their currency higher, and as US services, the closely watched employment report on Friday and a bunch of Federal Reserve speakers sent mixed signals on rates.

The dollar was just marginally higher, with the Canadian dollar the biggest loser at 0.5 per cent among the six currencies in the dollar's trade-weighted index. The dollar "can remain supported this week if the US CPI for March remains solid as we expect," analysts at Commonwealth Bank of Australia said.

In the United States, a tight job market and limited progress on inflation in the last couple of months have amplified calls among top officials, including Chair Jerome Powell, to be "patient" as they approach the decision on when to cut rates.

The March consumer price index is key for market participants seeking evidence that factors that made inflation accelerate more than expected at the start of the year are abating. "In the absence of a clear message from the Fedspeak, markets have focused on the optics of recent data, in which three consecutive payroll surprises and two CPI surprises have made it very difficult for investors to discuss a cooler economy and rate cuts," analysts at Morgan Stanley wrote on the weekend.

Yields on US debt have meanwhile pushed higher. At the short end of the curve, the two-year yield, which reflects interest rate move expectations, hit 4.765 per cent, the highest since Dec. 11 . Following the jobs data, the US rate futures market has reduced the odds of a June rate cut to 50 per cent, down from 66 per cent late on Thursday, the CME's FedWatch tool showed.
The dollar's biggest gains this year have been against the two big funding currencies for carry trades, the yen and Swiss franc . Both are down roughly 7 per cent each versus the dollar this year.

The euro was down 0.09 per cent at $1.0825. The Japanese yen weakened 0.06 per cent versus the greenback to 151.70 per dollar, while sterling was last trading at $1.2615, down 0.17 per cent on the day.

The base case for the ECB is to hold rates this week and possibly reinforce the possibility of a cut in June. But, while the ECB is increasingly confident that inflation is heading back to its 2 per cent target, it has remained vague about further easing.

The kiwi was a tad weaker at $0.6010 heading into a Reserve Bank of New Zealand policy meeting on Wednesday. It has shed 3.5 per cent in three weeks, however, as markets bet the recent weakness in economic data could make the RBNZ dovish.

Westpac analysts said the scenario of "a less dovish Fed contrasting with a more dovish RBNZ" could potentially push the currency to November lows around $0.59. Chinese markets reopen after holidays on Thursday and Friday to possibly more weakness in the currency and efforts by state banks to guide it higher, as they did last week when the yuan fell to a four-and-a-half-month low.

In cryptocurrencies, bitcoin last rose 2.2 per cent to $69,149.92.