CURRENCIES: Dollar Flat, On Course For Worst Month Since January

By Sara Sjolin and Anora Mahmudova, MarketWatch Features Dow Jones Newswires

Greenback could jump further after Friday's jobs report, analyst says

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The dollar put in a mixed performance on Monday, giving up earlier gains against the euro and the yen, but strengthening against the Canadian dollar.

The ICE Dollar Index , which measures the currency against six major rivals, was on track for its biggest monthly drop since January after three straight weeks of losses, as political uncertainty and disappointing U.S. economic data weighed on investors' minds.

On Monday, the ICE Dollar trimmed up earlier gains to trade 0.1% higher at 93.359 on Monday, mostly thanks to a 0.6% jump against the loonie.

The index is on track to post its fifth consecutive monthly decline, after a spectacular rise late last year.

The Canadian dollar slumped on Monday as oil crude-oil prices fell, providing a headwind to the big oil producer and exporter. But the loonie was still on track to book monthly gains, building on the 10% rally against the greenback since early May (https://www.wsj.com/articles/canadas-loonie-takes-flight-1501326002?mg=prod/accounts-wsj). The buck bought C$1.2521, up 0.6% from C$1.2434 late Friday.

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Monday's economic data failed to reignite confidence among currency traders. The Chicago business barometer, or Chicago PMI (http://www.marketwatch.com/story/economy-in-chicago-region-cools-in-july-but-still-running-hot-pmi-shows-2017-07-31), slipped to 58.9 in July from a three-year high of 65.7. Meanwhile, home-purchase contract signings (http://www.marketwatch.com/story/pending-home-sales-snap-three-month-losing-streak-with-15-gain-in-june-2017-07-31)jumped in June after three months of declines, another reflection of choppy momentum in the housing market.

Analyst at Brown Brothers Harriman say the tide against the dollar is both political and economic.

"The political anxiety has been deflected back to the US, where distractions, inexperience, and/or incompetence have frustrated the legislative process despite one party enjoying a majority in both houses of the legislative branch and control of the executive branch," said BBH analysts in emailed notes.

The index on Friday fell by 0.6% (http://www.marketwatch.com/story/dollar-spins-wheels-ahead-of-gdp-report-expected-to-show-faster-clip-of-growth-2017-07-28) to suffer its third weekly decline after a reading on U.S. gross domestic product came in below expectations, adding to concerns inflation will remain low and maybe keep the U.S. Federal Reserve from raising interest rates again later in 2017.

The central bank has already struck a cautious note on inflation (http://www.marketwatch.com/story/fed-to-wind-down-bond-holdings-relatively-soon-2017-07-26), with the Fed tweaking its official statement in July to say inflation was "running below 2%" instead of "running somewhat below 2%," as it did in the June statement.

On top of the uncertain monetary-policy outlook, the dollar has recently also been weighed by jitters in the White House. President Donald Trump on Friday replaced Reince Priebus as his chief of staff with retired General John Kelly (http://www.marketwatch.com/story/priebus-departs-as-chief-of-staff-as-trump-turns-to-kelly-2017-07-28) in a major shake-up. Additionally, a rift in the Republican party has left Trump struggling to dismantle Obamacare, spurring doubts he'll succeed in pushing through other election promises.

See:Trump says Republicans 'look like fools' because they can't push through agenda (http://www.marketwatch.com/story/trump-says-republicans-look-like-fools-because-they-cant-push-through-agenda-2017-07-29)

That has left the dollar reeling in July, setting the ICE index on track for a 2.4% drop for the month. That would mark the biggest monthly slide since January and a fifth straight month of losses.

However, the greenback could be set for a reversal later this week after the closely watched monthly U.S. jobs report on Friday, analysts said.

"Despite my belief that the U.S. dollar will remain weak for the rest of the year, all metric shows that the USD is massively oversold and will likely receive a little bounce from current levels," said FXTM chief market strategist Hussein Sayed, in a note.

"Friday's nonfarm payrolls will be crucial for the USD and if data does not disappoint we are likely to see a bounce," he said.

Other currencies: The ruble took a beating after Russian President Vladimir Putin said 755 U.S. diplomats and staff would be forced to leave (http://www.marketwatch.com/story/russia-retaliates-for-looming-sanctions-boots-out-755-us-diplomats-2017-07-30) the country by September in retaliation for impending U.S. sanctions on Moscow.

The dollar bought 60.1845 rubles, up from 59.514 rubles late Friday in New York.

The Japanese yen was stronger following a rise in industrial production in June (http://www.marketwatch.com/story/japans-june-industrial-production-ticks-up-2017-07-30). The dollar fetched Yen110.44, compared with Yen110.69 on Friday.

The euro reversed earlier losses to trade slightly higher at $1.1757 after headline inflation in the eurozone held steady in July at 1.3% rate.

(END) Dow Jones Newswires

July 31, 2017 10:57 ET (14:57 GMT)