Dollar Stalls Near Two-Month Low Ahead of Inflation Data

The US dollar hovered near its two-month low against major currencies on Monday as investors awaited this week's inflation data for clues on the Federal Reserve's rate path. The euro edged higher to $1.1558, nearing its strongest level since mid-June, while sterling was steady at $1.3490, near a five-week peak. The yen held firm at 157.90 per dollar, having given back some intervention-driven gains but remaining well off the roughly 164 multi-decade low hit late last month.

The dollar index, which tracks the currency against six major peers, was little changed at 99.6, hovering near its lowest level since June 2. Data on Friday showed the US economy unexpectedly shed jobs in July and job gains for the prior two months were revised sharply lower, cooling expectations for a Fed rate hike next month.

U.S. Treasury yields fell as the jobs report dashed hike bets, with those on benchmark U.S. 10-year notes last at 4.637%. The futures market has scaled back the chance of a September move to around 44%, from 67% a week ago. Geoff Yu, senior EMEA market strategist at BNY, wrote that the weaker US labor-market signal had pulled down real-rate expectations and extended the dollar decline.