U.S. Markets

Dollar gives up gains as jobs data in focus

NEW YORK (Reuters) - The U.S. dollar was flat on Monday, erasing earlier gains, as investors looked ahead to jobs data this week that Federal Reserve Vice Chair Stanley Fischer has said will be important to whether the U.S. central bank raises interest rates soon.

Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/File Photo

Investors have increased expectations that a hike is near since Fed Chair Janet Yellen said on Friday the case for an increase had strengthened in recent months as the labor market and economy improved. She gave no hints on the timing of an increase.

Fischer said later on Friday that Yellen’s speech was consistent with expectations for possible rate increases this year, sending the dollar higher and stocks and Treasury prices tumbling.

Fischer noted that Friday’s employment report for August, as well as other data, will be a factor in the decision.

“We’ve had a big dollar move,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, noting investors may take advantage of the recent gains to take profits before this week’s jobs data.

“I think that both the labor market and consumption are not going to sustain what we saw at the end of the second quarter, we could be disappointed,” he added.

Employers are expected on Friday to show 180,000 jobs gains in August, according to the median estimate of 89 economists polled by Reuters, below the better-than-expected 255,000 additions in July and 292,000 gains in June. [ECONUS]

It will be preceded on Wednesday by the ADP National Employment Report of private-sector payrolls.

Against a basket of major currencies .DXY, the dollar hit its highest in two weeks at 95.834, before falling back to 95.607. The euro EUR= was little changed at $1.1189 after earlier falling to $1.1159.

The dollar gained 0.09 percent against the Japanese currency at 101.93 yen JPY=, after earlier rising to 102.39, its highest since Aug. 9.

A strong jobs report on Friday could renew dollar strength. The contrast between a more hawkish Fed and central banks in Japan and Europe maintaining highly stimulative policies is expected to help the dollar in the medium term.

“This policy divergence should be supportive for the dollar,” said Stewart Richardson, chief investment officer at RMG Wealth Management.

The dollar gained slightly after data on Monday showed that U.S. consumer spending increased in July for the fourth straight month, although inflation remained subdued.

Additional reporting by Anirban Nag in London; Editing by Lisa Von Ahn and Chizu Nomiyama