Dollar pulls back after jobs-inspired rally, Greece back in focus

[TOKYO] The dollar dipped on Monday as traders sold into a rally triggered by robust US jobs data, while the Greek debt situation crept back into focus as Athens reaffirmed its rejection of an international bailout programme.

The dollar index, an indication of its performance against a basket of key currencies, slipped 0.2 per cent to 94.535.

The euro edged up 0.2 per cent to US$1.1338, having lost about 1.5 per cent on Friday when strong US employment figures helped rekindle views that the Federal Reserve will hike interest rates as early as June.

Friday's data showed a rebound in US wages and nonfarm payrolls increasing by 257,000 in January, outstripping Wall Street forecasts.

The dollar was down 0.3 per cent at 118.75 yen after scaling a one-month high of 119.23 after the jobs data. "Dollar/yen was confined in range for a while before the US payrolls, so profit taking is being triggered with the pair now having broken out of that range," said a trader at a Japanese bank. "Treasury yields will have to consolidate first before the dollar can test further upside. In addition to yields, we are watching how risk assets fair amid the current global events," the trader said.

The benchmark 10-year Treasury note yield jumped to a near one-month high of 1.965 per cent on Friday before taking some wind out of the dollar's surge by pulling back to 1.922 per cent.

Meanwhile, Greece was back in focus as Prime Minister Alexis Tsipras remained adamant that improved bailout terms was the only way out for the debt-strapped nation.

Tsipras laid out plans on Sunday to dismantle Greece's "cruel" austerity programme, ruling out any extension of its international bailout and setting himself on a collision course with his European partners. "Developments in Europe will remain in focus this week, such as the Eurogroup meeting and European Council meeting. Improvements in risk sentiment resulting from these events should buoy dollar/yen, while, signs of further confusion will have the opposite impact by damaging risk appetite," said Shinichiro Kadota, chief Japan FX strategist at Barclays in Tokyo.

Euro zone finance ministers meet at the Eurogroup gathering on Wednesday, at which the Greek finance minister has said he will present a comprehensive proposal. The European Council meeting takes place the following day.

The euro has experienced wide swings this month, as hopes that Greece could win swift relief from its creditors alternated with worries a deal cannot be reached, raising the prospect of Greece exiting the euro.

The Australian dollar took a knock as data released on Sunday renewed worries about slowing growth in China, a major trading partner.

The Aussie was down 0.4 per cent at US$0.7770, edging back towards a six-year low of US$0.7627 hit a week ago when the Reserve Bank of Australia eased monetary policy.

REUTERS