Dollar Fails to Gain Momentum Amid Rate Hike Expectations

The dollar struggled to gain momentum on Monday despite an increase in expectations for a US Federal Reserve rate hike. A stronger-than-expected US jobs report from Friday fueled speculation of a September rate hike, with traders pricing in a roughly 57% chance.

Elias Haddad, global head of markets strategy at BBH, noted that a hot Consumer Price Index (CPI) print would 'all but seal a September hike and underpin a firmer US dollar.' However, he also warned that even if a rate hike becomes inevitable, the dollar may not reach new cyclical highs due to tightening by other major central banks.

The euro and sterling were marginally higher against the dollar, while the yen rose more than 0.2% after Japanese Prime Minister Sanae Takaichi's economic adviser projected a Bank of Japan (BOJ) hike this month. The BOJ is seen certain to lift rates to 2.75% on Thursday.