Dollar Edges Closer to Two-Month Low Ahead of Key Inflation Data

The US dollar hovered near a two-month low against major currencies on Monday as traders assessed the latest weakness in the American labor market and awaited key inflation figures that could influence the Federal Reserve's interest-rate decisions.

The euro edged up to $1.1558, staying close to its strongest level since mid-June, while sterling was largely unchanged at $1.3490, near a five-week high. The Japanese yen stood at 157.90 per dollar, having surrendered some of its recent intervention-related gains but remaining considerably stronger than its multi-decade low of around 164 recorded late last month.

The weaker employment signal in the US economy triggered a decline in US Treasury yields, with the benchmark 10-year Treasury yield last reported at 4.637%. Interest-rate futures now indicate that traders see roughly a 44% probability of a September rate move, down substantially from about 67% a week earlier.

According to Geoff Yu, senior EMEA market strategist at BNY, the softer labor-market figures lowered expectations for real interest rates and contributed to the dollar's decline. However, he noted that markets had not yet shifted towards a clear easing outlook.