Could a weaker jobs report Friday revive the buck?
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The euro extended its recent gains, rising against the dollar on Monday to book the best monthly gain in more than a year and hitting the highest level since January 2015.
The strength of the shared currency, however, is due largely to weakness of the U.S. dollar, analysts at Brown Brothers Harriman said.
The euro reversed earlier losses to trade higher at $1.1834, after headline inflation in the eurozone held steady in July at a 1.3% rate. The shared currency traded above the psychologically important $1.18 level for the first time since January 2015. The euro has gained 3.5% over the month and is up 12.4% year to date.
The dollar weakened against most major rivals on Monday, with the trade-weighted index falling to a 15-month low, wrapping up one of the worst monthly performances since early 2016.
The ICE Dollar Index , which measures the currency against six major rivals, reversed earlier gains to trade 0.4% lower at 92.853, its lowest level since May 2016. The DXY is on track to log a 2.9% drop in July, its fifth-consecutive monthly decline and the biggest drop since March 2016.
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Analysts at Brown Brothers Harriman said the tide against the dollar is both political and economic.
"The political anxiety has been deflected back to the U.S., 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," they said in emailed notes.
In fact, the dollar pushed to fresh intraday lows as news hit that Anthony Scaramucci was ousted as White House communications director (http://www.marketwatch.com/story/anthony-scaramucci-ousted-as-white-house-communications-director-2017-07-31-151031643) Monday afternoon, the latest in personnel shuffling that enlivens currency market jitters over the White House's ability to advance policy.
President Trump just 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, highlighting the uphill climb for pushing through other election promises.
Monday's economic data failed to reignite confidence among currency traders. A regional business barometer, the 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.
The dollar 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.
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)
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 [dollar] 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 [dollar] and if data does not disappoint, we are likely to see a bounce," he said.
The dollar fell against the Japanese yen following a rise in Japanese industrial production in June (http://www.marketwatch.com/story/japans-june-industrial-production-ticks-up-2017-07-30). The dollar fetched Yen110.37 late Monday in New York, compared with Yen110.69 on Friday. Over the month, the yen gained 1.8% and is up 5.6% year to date.
The dollar also fell against the British pound , with sterling changing hands at $1.3181 late Monday in New York, up 0.4% from $1.3136 late Friday. Cable, as the pair is nicknamed, is up 1.2% over the month and up 6.8% year to date.
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 only other G-10 currency that the dollar gained against on Monday was its counterpart north of the border.
The Canadian dollar fell on Monday as crude-oil prices initially declined, but trimmed losses as oil rebounded. Still, the loonie booked hefty monthly gains, rising 3.8% in July and 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$1.2471, up 0.3% from C$1.2434 late Friday.
(END) Dow Jones Newswires
July 31, 2017 16:00 ET (20:00 GMT)