Expectations of US interest rate cut the dollar
Countries faced pressure on Thursday, trading near weekly lows against the yen as lower yields on Treasury bonds boosted expectations that the Federal Reserve will cut interest rates this month for the first time in 10 years.
Government bonds are rising globally, pushing yields of US Treasuries to their lowest level in more than two and a half years and European yields to record lows amid mounting bets that major central banks will facilitate monetary policy to boost the global economy.
Sentiments to the dollar have also been hurt by the decline in expectations for a quick solution to the US-China trade war.
The focus now shifts to US non-farm jobs data released on Friday, and economists expect it to rise 160,000 in June, from 75,000 in May.
However, positive job data is unlikely to support the dollar given the strong outlook for US interest rate cuts, given the low inflation and the impact of the US-China tariff dispute.
“Everyone from the Reserve Bank of Australia to the Fed is talking about disappointing inflation,” said Mayank Mishra, macroeconomic strategist at Standard Chartered Bank in Singapore.
“You can say that the Fed has more room to make it easier for others, which, in theory, should lead to a weaker dollar.”
The dollar was flat at 107.80 yen on Thursday, after hitting a one-week low of 107.54 yen on Wednesday.
The US currency has fallen 3.5 percent against the yen in the past three months amid signs the Fed will cut rates at the July 30-31 meeting.
The dollar index fell against a basket of six major currencies slightly to 96.734.
The global foreign exchange market is likely to be quiet on Thursday as US financial markets are closed on public holidays.
The Australian dollar hit $ 0.6929 after rising 0.5 percent overnight, away from the low of $ 0.6956 touched earlier in the week.
The euro was little changed at $ 1.1285 on Thursday, close to a two-week low of $ 1.1268.
The pound hit $ 1.2586 to stay near a two-week low of $ 1.2557 on speculation that the Bank of England will abandon its interest rate hike and move to the facilitation camp as the outlook for the trade war and uncertainty over Britain’s negotiations to leave the EU are affected.