CURRENCIES: Dollar Rebounds, But Stays On Course For Worst Month Since January

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

The dollar rebounded from three straight weeks of losses on Monday, but was still on track for its biggest monthly drop since January, as political uncertainty and disappointing U.S. economic data weighed on investors' minds.

The ICE Dollar Index climbed 0.2% to 93.463, setting it on track for its biggest one-day percentage gain since July 3, according to FactSet data.

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 2.2% 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 60.223 rubles, up from 59.514 rubles late Friday in New York.

The Japanese yen was largely flat after trading higher earlier in the session 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 Yen110.68, compared with Yen110.69 on Friday.

The euro fell to $1.1726 from $1.1751 on Friday ahead of the flash estimate for July eurozone inflation. That preliminary reading on consumer prices is due out at 10 a.m. London time, or 5 a.m. Eastern Time.

The Canadian dollar fell on Monday, pulling back after an about 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 1.2474 Canadian dollars, up from 1.2434 late Friday.

(END) Dow Jones Newswires

July 31, 2017 04:38 ET (08:38 GMT)