(Reuters) - The euro edged off a three-week peak on Monday as the dollar took heart from strong U.S. jobs data and ahead of inflation figures due later this week, which will likely cement expectations for a March Federal Reserve rate hike.
The European common currency dropped around 0.14% to as low as $1.1423 in Asian trading on Monday, having hit its highest since mid-January on Friday.
Those gains had been driven by a hawkish turn from the European Central Bank last week, which led markets to bring forward the likely timing of eurozone rate rises and sent bond yields sharply higher.
However, the dollar then found support as U.S. Treasury yields rose after far better than expected jobs data. Markets have now priced in a one-in-three chance the Fed might hike by a full 50 basis points in March, and reasonable chance rates will reach 1.5% by year-end. [FEDWATCH]
These expectations could be bolstered by the U.S. consumer price index due Thursday.
"Until we get that CPI number, it's just going to be people trying to guess whether the rate settings are the right settings," said Chris Weston head of research at Melbourne-based brokerage Pepperstone. "That's going to throw front-end yields around and we'll see little tweaks in currencies based on small yield differentials that narrow and contract."
U.S. two-year yields were holding firm in Asian hours on Monday after gaining sharply after the jobs data, and briefly touched a new two-year high of 1.33%. [US/]
Benchmark 10-year yields also held onto Friday's gains and were at 1.9014%.
The yen was a little softer at 115.35 per dollar, and sterling was at $1.3521, both in the middle of their recent ranges.
This left the dollar index at 95.582 up nearly 0.1%.
Markets will also be watching scheduled speeches by policymakers at the Fed and the UK, European, Australian, and Canadian central banks, to see whether they drop any further hints on rate policy.
Klaas Knot, the Dutch Central Bank president and one of the more hawkish members of the ECB's governing council, said on Sunday he expects a hike in the fourth quarter of this year.
With the Reserve Bank of Australia at the more dovish end of the central bank spectrum, the Australian dollar was on the back foot at $0.7081
The Aussie is also weak against other currencies, and on Friday touched its lowest since September versus the euro.
Elsewhere Bitcoin was trading at around $41,800, having jumped 11% late on Friday.
Currency bid prices at 0552 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar $1.1435 $1.1451 -0.15% +0.58% +1.1474 +1.1425
Dollar/Yen 115.3100 115.2000 +0.10% +0.26% +115.3700 +115.1700
Euro/Yen 131.86 131.90 -0.03% +1.18% +132.1300 +131.7100
Dollar/Swiss 0.9253 0.9254 +0.01% +1.46% +0.9262 +0.9249
Sterling/Dollar 1.3521 1.3525 -0.03% -0.03% +1.3540 +1.3517
Dollar/Canadian 1.2736 1.2769 -0.26% +0.73% +1.2756 +1.2728
Aussie/Dollar 0.7084 0.7078 +0.10% -2.54% +0.7092 +0.7066
NZ 0.6618 0.6615 +0.08% -3.28% +0.6623 +0.6602
Dollar/Dollar
