Dollar Near Two-Week High as U.S. Jobs Data Comes Into Focus

The U.S. dollar started the week near its highest level in almost two weeks as traders increased bets on another Federal Reserve rate increase.

Expectations shifted after Federal Reserve Chair Kevin Warsh indicated that further tightening could be needed if inflation remains above target. Market pricing moved to around a 57% probability of a September rate increase, while short-term U.S. Treasury yields also moved higher.

The move has put U.S. employment data back at the centre of the forex market.

USD/JPY Returns to the 160 Area

The yen remained one of the weakest major currencies, with USD/JPY trading around the 160 level.

Higher U.S. yields continue to support the dollar against the yen, while the interest-rate gap between the United States and Japan remains an important driver of the pair.

The return toward 160 follows a period of unusually large moves in the yen, making the level closely watched by currency traders.

For now, the latest price action has remained relatively contained rather than developing into another sharp one-way move.

U.S. Employment Data Becomes the Next Test

The next major releases begin with U.S. job openings data on September 1, followed by the August employment report on September 4.

The Bureau of Labor Statistics is scheduled to publish the August payroll figures at 8:30 a.m. Eastern Time.

The previous report showed nonfarm payrolls falling by 23,000 in July, while the unemployment rate remained at 4.1%. Earlier payroll estimates for May and June were also revised lower.

A stronger August report could reinforce expectations for higher U.S. rates, while weaker employment data would challenge the recent shift in market pricing.

Bank of Canada Decision Also Ahead

The Bank of Canada is also scheduled to announce its next interest-rate decision on September 2.

The decision adds another potential source of movement for USD/CAD during a week already dominated by U.S. labour-market data.

With the dollar strengthening into the start of September, the upcoming data will determine whether the latest move develops into a broader trend or remains a short-term adjustment in rate expectations.

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