Dollar rally stalls after record run higher

The dollar pulled back from four-year peaks against a basket of other major currencies on Monday, as investors consolidated gains after a strong jobs report on Friday fuelled expectations for an early hike in interest rates.

It notched up its twelfth consecutive weekly gain last week, the longest rally since the index was created in 1971.The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was down 0.31% to 86.51, off Friday’s four-year peaks of 86.79.

The dollar strengthened across the board after data on Friday showed that the U.S. economy added 248,000 jobs in September, well ahead of forecasts for jobs growth of 215,000. The unemployment rate ticked down to 5.9%, the lowest level since July 2008.

The dollar has rallied in recent months, amid expectations that the Federal Reserve is growing closer to raising interest rates, while central banks in Europe and Japan look likely to stick to a looser monetary policy stance.

USD/JPY was down 0.40% to 109.33, off Friday’s highs near six-year highs of 109.86.

The Bank of Japan was to conclude its two-day policy meeting on Tuesday and was expected to leave monetary policy on hold, despite a recent slew of weak economic data.

The euro was also higher, with EUR/USD rising 0.33% to 1.2556, easing back from Friday’s two year trough of 1.2499.

The euro’s gains came in spite of data on Monday showing that German factory orders fell 5.7% in August, compared to expectations for a 2.5% decline. It was the largest drop since early 2009, adding to concerns over the outlook for the euro zone’s largest economy.

The European Central Bank refrained from implementing additional stimulus measures at its meeting last week, indicating that it will wait to see the effects of recent stimulus measures on the region’s economy.

The pound eased back from 11-month lows, with GBP/USD edging up 0.12% to 1.5988, while USD/CHF slid 0.22% to 0.9650.

The commodity linked dollars also gained ground, with AUD/USD rising 0.66% to 0.8732 ahead of Tuesday’s rate review by the Reserve Bank of Australia.

NZD/USD added 0.26% to trade at 0.7782, while USD/CAD was down 0.28% to 1.1216.