Dollar near two-month high after jobs report
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- Dollar hovered near a two-month peak following a strong May U.S. jobs report, fueling investor bets on a Federal Reserve rate increase this year
- Federal Reserve rate hike expectations rose to a 40% chance by October, according to CME's FedWatch tool, after Friday's payroll data
- Euro edged higher to $1.1531 but remained near a nine-week low, as markets weighed upcoming ECB rate decisions against U.S. inflation data
- Japanese yen strengthened slightly to 160.17 per dollar but has erased gains from Japan’s $73 billion intervention in late May
- BOJ is expected to raise interest rates in June unless escalating Middle East tensions disrupt markets, sources told Reuters
- Iran and Israel agreed to halt attacks after U.S. President Trump’s appeal, marking a pause in their most direct confrontation since April
Why it matters: The dollar’s strength reflects growing confidence in U.S. monetary policy divergence, with a 40% chance of a Fed hike by October versus a near-certain ECB hike this week. This gap risks further yen weakness, especially if Japan refrains from intervention near the 160 level.
