Dollar hovers near three-week trough as US yields taper off

Dollar fell in European trade on Monday against a basket of major rivals, extending losses for the fourth straight session and approaching three-week lows as US 10-year treasury yields declined.

Recent disappointing US labor data boosted the odds of two Fed interest rate cuts this year and in turn hurt the standing of the dollar. 

The odds of US interest rate cuts in September and November in particular surged as investors await more clues on the developments of the fight with inflation. 

The Price 

The dollar index fell 0.1% to 105.03 today, with a session-high at 105.20. 

The index closed down 0.25% on Friday, the third session in a row, marking a three-week trough at 104.52 following weak labor data. 

The index tumbled 0.95% last week, the second weekly loss in a row, and the largest since early March as US treasury yields fell following a bearish Fed meeting. 

US Yields 

US 10-year treasury yields fell over 0.6% on Monday for the fourth straight session to near three-week lows at 4.455%, hurting the dollar’s standing. 

The decline comes after US payrolls data for April, which missed expectations and reduced pressure on the Fed, while opening the door for multiple interest rate cuts this year. 

US Labor Sector 

The US government reported the addition of 175 thousand new jobs to the economy in April, down from 315 thousand in March, while analysts expected the addition of 240 thousand jobs. 

US unemployment rose to 3.9% last month from 3.8%, however it remains below 4% for the 27th month in a row.

Following the data, the odds of a Fed 0.25% interest rate cut in June rose to 20% according to the Fedwatch tool, while the odds of such a cut in July rose to 45%. 

Now investors expect two interest rate cuts by the Federal Reserve this week.