The dollar fell from a 6-1/2-month high against the euro on Monday as investors took profits on the greenback's surge after bumper US jobs data bolstered bets on the US Federal Reserve raising interest rates in December. The only major currency against which the dollar climbed further on Monday was the yen, which hit a 2-1/2-month low of 123.495, down 0.3 percent on the day.
The euro had fallen sharply on Friday to $1.07045, its weakest since mid-April. That took the single currency's falls to almost 6 percent in the two weeks since the European Central Bank indicated that it would expand its asset-purchase programme and could further cut its deposit rate. But on Monday, the single currency recovered 0.4 percent to $1.0774. That rebound saw the dollar index, which tracks the greenback against a basket of major currencies, fall off a 6-1/2-month high of 99.345, to 98.898, down a third of a percent on the day.
"There is some modest profit-taking...but there's more upside risk to the dollar than downside," said BMO Capital Markets currency strategist Adam Gallo in London. Gallo added that Friday's US retail sales number should give currency investors further clues on how many interest rate rises to expect in 2016. Some analysts said the ECB's dovishness at its last meeting had been because of the euro's strength, and the fact that the single currency had now fallen back made another deposit rate cut less likely, thereby providing support to the euro.
"The lower euro/dollar goes, the less need there is for the ECB to do more," said BNP Paribas currency strategist Michael Sneyd in London. The US non-farm payroll report on Friday showed a rise of 271,000 last month, far exceeding the 180,000 new jobs for October economists polled by Reuters had predicted. Following the report, 15 of 17 primary dealers, the banks that deal with the Federal Reserve directly, said they expect it to raise rates at its next meeting in December, according to a Reuters poll. Even ahead of the robust jobs data, some investors had begun betting on a rate increase. Speculators bolstered bullish bets on the US dollar in the week through November 3, as net long-dollar positions climbed to their highest in more than two months, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.