Dollar edges up as markets weigh chances of Fed rate hike

The dollar edged up against major peers on Monday, as markets priced in around a 1-in-4 chance of the U.S. Federal Reserve raising benchmark rates this month after robust jobs data on Friday.

The dollar index – which tracks the greenback against six peers – came off the boil last week, after some Fed officials voiced a preference for a pause in rate hikes and after a breakthrough in U.S. debt ceiling talks calmed market jitters.

Despite a surprisingly high payroll figure for May, indicating the U.S. economy may still be running hot, analysts said the Fed may still have scope to pause rate rises as wage pressures eased and unemployment rose from a 53-year low.

Markets now put the probability of a 25 basis point hike at the meeting on June 13-14 at 27%, down from 2-in-3 odds a week earlier.

The chance of a 25 basis point raise at the June 13-14 meeting is now 27%, down from 2-in-3 odds a week ago.

The dollar index closed the day up 0.1% at 104.260.

Analysts believe core inflation data expected next week will be more likely to move the needle than services data arriving later on Monday.

The euro fell 0.1% to $1.06930, extending the previous session’s 0.5% decline, with investors anticipating European Central Bank chief Christine Lagarde’s appearance before the European Parliament later on Monday.

The dollar rose 0.3% against the yen to 140.340.

The Australian dollar fell 0.3% to $0.65870 ahead of the central bank’s decision on whether to hike interest rates on Tuesday, which analysts said was on a knife-edge.

Meanwhile, the Turkish currency has fallen more than 1% since President Tayyip Erdogan’s re-election.

Despite the nomination of Mehmet Simsek as Turkeuy’s finance minister, who gained market trust during prior spells in government between 2009 and 2018, the slide occurred.