Dollar Dips Slightly but Awaits Crucial U.S. Jobs Report

The dollar fell slightly on Monday but stayed near its two-week high as investors anticipated the upcoming U.S. jobs report. Analysts suggest the jobs data will influence Federal Reserve's interest rate cut decision. Market speculations show a high chance of a 25 basis point cut, reflecting economic stability.

The dollar saw a slight decline on Monday but remained close to its highest level in almost two weeks, with investor attention shifting to a critical U.S. jobs report due at the week's end. The upcoming U.S. payroll release, scheduled for Friday, is pivotal following Federal Reserve Chair Jerome Powell's shift from focusing on inflation to safeguarding against job losses.

Analysts believe the job figures will significantly impact the extent of the Federal Reserve's anticipated rate cut. Markets have preemptively priced in a 25 basis point cut. Earlier, the dollar had reached its strongest since August 20, supported by a rise in long-term Treasury yields, indicating a smaller rate cut due to favorable inflation data.

U.S. gross domestic product figures also suggested the economy is stable enough to allow the Federal Reserve to adopt a less aggressive policy stance. Traders currently estimate a 33% probability of a 50-basis point rate cut this month but fully expect a quarter-point cut. Just a week ago, there was a 36% expectation for the larger rate reduction.

(With inputs from agencies.)