US dollar holds steady around three-week lows

On Monday, the dollar hovered around three-week lows after Federal Reserve chairman Jerome Powell outlined a slower-than-expected path to tapering. Investors are focusing their attention on the US jobs data due on Friday for clues on when the Federal Reserve will begin to taper.

The Federal Reserve chairman stated that the Fed is not in a hurry to raise interest rates, and Policymakers should monitor economic data carefully for as long as the delta virus threatens economic activities. Moreover, without mentioning the exact date for the reduction of bond purchases, he limited the possibility of starting this action before the end of the year.

Euro and Yen rose to new records

During Asian trade, the euro rose to its highest level since early August, reaching $1.18100, and the Yen reached its highest level since last Wednesday, at 109.693 against the dollar.

As well as crude prices rising, oil-exposed currencies also gained due to a storm that hit the Gulf of Mexico, helping the Norwegian crown surge to its highest level since late July Investors reacted swiftly to the Federal Reserve's decision as bond yields on 10-year notes fell to around 1.30 on Monday.

The dollar lost ground against the Yen after breaking through the 109.874 key level, creating a new floor at 109.693 as sellers erase almost all the last week's growth.

The US stock market increase is expected to strengthen the Japanese yen against the dollar and thereby prevent further declines in the currency pair to bring prices back to the key level of 109.874.

Events of the day

The London session on Monday is not expected to be very active due to a British holiday. Germany will release its preliminary inflation figures for August on Monday afternoon. The annual HICP rate is expected to rise to 3.4% from 3.1%, while headline CPI is expected to print higher at 3.9%.

Investors are awaiting the release of the pending home sales data this evening, which could strengthen the dollar if it is better than expected.

The NFP report will be released on Friday as the major event of the week, which is not only crucial to investors but the Fed. It can have a decisive effect on the future direction of the markets.