The US dollar inched higher from a two-month low against major currencies on Monday, as oil prices climbed due to a muddled Middle East outlook while investors awaited this week's inflation data for more clues on the Federal Reserve's rate path.
The euro was slightly weaker at $1.1551, hovering near its strongest level since mid-June, while sterling was steady at $1.3486, below its five-week peak. The yen weakened to a low of 158.30 per dollar, continuing to pare intervention-led gains but still well off the roughly 164 multi-decade low hit late last month.
The dollar index, which tracks the currency against six major peers, was up 0.06% at 99.7, regaining some ground after hitting the lowest level since June 2.
Oil prices rose on Monday, with Brent oil futures last up 1.4% at roughly $85 per barrel amid continued uncertainty over the reopening of the Strait of Hormuz.
Iran said a deal with Oman defining new shipping lanes was in its final stages but added that the US must still meet other conditions, muddling the energy supply outlook.
Meanwhile, data on Friday showing the US economy unexpectedly shed jobs in July while job gains for the prior two months were revised sharply lower, cooling expectations for a Fed rate hike next month.
That adds extra weight to this week's CPI report, along with retail sales data, as investors look for clues on the path of Fed policy.
"Markets need confirmation that softer labor demand is translating into sustainable disinflation rather than simply weaker growth," Geoff Yu, senior EMEA market strategist at BNY, wrote in a note, adding that perceptions around US inflation data will likely be the biggest swing factor this week.
CPI IN FOCUS
The futures market has scaled back the chance of a September move to around 44% from 67% a week ago. US Treasury yields also held onto their declines after the jobs report dashed hike bets, with those on benchmark US 10-year notes last at 4.637%.
A consensus estimate calls for the core CPI to rise 0.2% month-on-month in July, lifting the annual rate to 2.5% and extending a gradual moderation in inflation. The annual rate was 2.6% in June.
Producer price data on Thursday and retail sales figures on Friday will further inform the outlook for inflation.
"Although there's a lot of inflation dynamics, the Fed will for now stay on the sidelines and wait to see how things play out," Rodrigo Catril, senior FX strategist at NAB, said in a podcast.
In Asia, the New Zealand dollar and Australian dollar each slipped 0.1% to $0.7062 and $0.5887 respectively.
Market participants await the Reserve Bank of Australia's rate decision on Tuesday. The central bank is expected to hold its key rate at 4.35% for the rest of the year.
Elsewhere, Chinese yuan held steady at 6.7440, near its strongest level in 3-1/2 years, after data showed China's producer price inflation eased last month.
