By Ankur Banerjee
SINGAPORE (Reuters) - The dollar maintained its position near a two-week high against the yen and the euro on Tuesday as investors awaited a wave of economic data, including Friday's U.S. payrolls report, which will impact the potential size of an anticipated interest rate cut by the Federal Reserve.
The euro was last seen at $1.1060, not far from the two-week low of $1.1042 reached in the previous session, while the yen was trading at 147.10 per dollar, close to the two-week low of 147.16 hit on Monday.
Investor attention this week will be squarely focused on the U.S. payrolls data set to be released on Friday after Federal Reserve Chair Jerome Powell signaled last month that interest rate cuts are on the horizon due to concerns about the labor market.
Prior to the payrolls release, job openings data on Wednesday and the jobless claims report on Thursday will also be closely watched.
Market expectations currently indicate a 69% likelihood of a 25 basis points (bps) rate cut when the Fed convenes on Sept. 17-18, with a 31% chance of a more aggressive 50 bps cut, according to the CME FedWatch tool.
This week's deluge of labor market data will be pivotal in determining whether the Fed opts for a 25 or 50 bps cut in September, stated Charu Chanana, head of currency strategy at Saxo.
"If the data remains strong, a 25 bps cut is more probable. However, a weak non-farm payrolls report, particularly if job additions fall below 130k with a simultaneous increase in the unemployment rate, could shift market expectations towards a 50 bps cut," Chanana added.
Economists surveyed by Reuters are anticipating the addition of 165,000 U.S. jobs in August, up from the previous month's increase of 114,000.
The DXY index, which measures the U.S. dollar against six major currencies, was at 101.69 in early trading, slightly below the two-week high of 101.79 touched on Monday. The index had declined by 2.2% in August amid expectations of impending U.S. rate cuts.
Sterling saw a slight dip to $1.31425 in early trading. The Australian dollar was down by 0.14% at $0.6782, while the New Zealand dollar dropped by 0.18% to $0.6223.
Analysis: The current strength of the U.S. dollar against other major currencies suggests that investors are positioning themselves for potential interest rate cuts by the Federal Reserve. The upcoming U.S. payrolls report will be crucial in determining the magnitude of the rate cut, with market expectations split between a 25 bps and a 50 bps reduction. Depending on the data, the dollar could either continue its upward trajectory or face downward pressure. Stay tuned for the latest updates on how these developments could impact your investments and financial decisions.
