Dollar stands tall as growth momentum fades

London

THE dollar erased all losses sustained after last week's poor US jobs report and extended gains versus its rivals on Monday as concerns about slowing global growth boosted its safe-haven appeal in a big week for central banks.

The dollar index, which measures the currency against six rivals, edged 0.2 per cent higher to 92.31. It had dipped to 91.941 for the first time since Aug 4 on Friday, when a closely watched US labour report showed the world's largest economy created the fewest jobs in seven months in August.

While the weak jobs report doused expectations that the Fed might strike a hawkish note at a meeting later this month, analysts said the data is yet another reminder of global growth losing steam after a bounce earlier this year, a significant headwind for cyclical currencies like the euro and the Aussie.

Economic surprise indexes from the United States to China have slipped sharply in recent weeks while latest manufacturing surveys from Britain to Japan show the rise in coronavirus Delta cases is sapping sentiment.

Kenneth Broux, an FX strategist at Societe Generale, ascribed the dollar's rise to profit-taking on the euro and other currencies before central bank policy meetings this week.

Most of the dollar's gains was focused on the Australian dollar, which weakened 0.2 per cent to US$0.7435 ahead of a central bank decision on Tuesday where analysts remain divided on whether the Reserve Bank of Australia will call time on its stimulus plans. National Australia Bank predicts the central bank will reduce asset purchases again, "although the optics of tapering amid protracted lockdowns means it is likely to be a close decision", NAB analyst Tapas Strickland wrote in a report.

The euro also failed to extend its gains on Monday after rising above the US$1.19 levels for the first time since the end of July. It was trading 0.1 per cent weaker at US$1.1865 before an European Central Bank (ECB) policy decision on Thursday.

Economists reckon it is still too early for the ECB to call time on emergency stimulus, but it could agree to slow the pace of its bond buys after euro area inflation surged to a 10-year high at 3 per cent last week.

In cryptocurrencies, bitcoin was about flat at US$51,862, after earlier touching US$51,920, a level not seen since May 12. Smaller rival ether traded little changed at US$3,942.77 after topping US$4,000 last week for the first time since mid-May. REUTERS