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U.S. dollar edges lower in muted trade

8/8/2017, 4:55:13 PMTrading Strategies
U.S. dollar edges lower in muted trade

The U.S. dollar edged lower against a basket of the other major currencies on Tuesday, but continued to hold most of its gains from Friday as a solid U.S. jobs report revived hopes for another rate hike by the Federal Reserve this year.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, dipped 0.12% to 93.19 by 03.47 a.m. ET (07.47 a.m. GMT).

The index was holding well above last Wednesday’s 15-month trough of 92.41, but was off the high of 93.64 set on Friday in the immediate aftermath of the employment report.

The Labor Department reported that the U.S. economy added 209,000 jobs last month, handily beating expectations for a gain of 183,000, while an uptick in wage growth indicated that inflationary pressures are firming.

Markets believe stronger inflation will enable the Fed to stick to its plans for a third interest rate hike this year.

The greenback had been pressured lower by a combination of worries over political turmoil in Washington and recent lackluster economic reports, which raised doubts over whether the Fed would be able to stick to its planned tightening path.

Investors were looking ahead to U.S. inflation reports later in the week for indications of whether the recovery in the dollar is sustainable in the longer term.

A report on U.S. producer prices for July is due out on Thursday and the consumer price inflation report will be released on Friday.

The euro pushed higher, with EUR/USD rising 0.16% to 1.1814 but gains were held in check by disappointing German trade data.

Figures released on Tuesday showed that German exports fell by 2.8% in June, snapping five months of gains. It was the biggest drop since August 2015. German imports dropped by 4.5%, the largest decline since January 2009.

That drove Germany’s trade surplus up to €21.1 billion, from €20.3 billion in May, a 10-month high.

The dollar was lower against the yen, with USD/JPY slipping 0.16% to 110.56.

The yen was little changed against the euro, with EUR/JPY last at 130.61.

The Australian dollar was a touch higher, with AUD/USD up 0.16% at 0.7925, off highs of 0.7939.

The Aussie pulled back after weaker-than-expected trade data from China which showed exports rose 7.2% from a year earlier and imports grew 11.0%.

Meanwhile, sterling was a touch higher, with GBP/USD at 1.3047