FOREX-Dollar climbs as case for US companies to hike rates

* Strong US jobs and high CPI bolster bullish bets * Aussie hits 2.5-year low below $0.64 * Sterling comes under renewed pressure * Markets China to return after week-long break By Tom Westbrook SYDNEY, Oct 10 (Reuters) – The dollar started the week strongly on Monday, with a strong U.S. labor market bolstering bets on higher interest rates as traders brace for data that should show stubbornly high inflation. Unemployment in the United States fell unexpectedly last month, figures showed on Friday, and inflation data due on Thursday is expected to show headline inflation at 8.1% year-on-year. Policy makers’ preferred core inflation is expected to be 6.5%. Westpac strategist Sean Callow said the data and rising yields in response were a “robust combination for the dollar.” “This is further proof that the US economy is not collapsing,” he said. “It only fuels the idea that the Fed is going to spend the next three weeks saying the same thing about interest rates.” Rising oil prices and geopolitical tensions have also provided plenty of reason for growth jitters, weighing on energy-importing currencies in Europe and even exporters such as the growth-sensitive Australian dollar. The Aussie fell 0.3% to a 2.5-year low of $0.6347 in early trade in Asia which was brightened by a holiday in Japan. The pound fell 0.2% to $1.1071 as the yen drifted to a weaker 145 to the dollar zone, prompting authorities to step in to support it last month. The yen was last at 145.37 to the dollar. The New Zealand dollar touched a two-week low at $0.5593. Futures prices suggest traders see nearly a 90% chance of a 75 basis point rate hike in the US next month and more than 150 basis points of tightening by May. Ten-year Treasury yields rose for a tenth consecutive week last week. Benchmark Brent crude futures jumped more than 11% last week after the Saudi-led production cartel agreed to cut supply, as the war in Ukraine intensifies. also a threat to Europe’s energy security as winter approaches. The euro fell below $0.98 on Friday and was last at $0.9733. The U.S. dollar index was flat at 112.83, after bottoming around 110 last week and climbing back to last month’s 20-year high of 114.78. Markets were waiting to see how the Kremlin might react to an explosion that hit Russia’s only bridge to Crimea. Nuclear-armed North Korea recently carried out a seventh missile test over the weekend. Chinese markets reopened after a week-long holiday and before that the offshore yuan was flat at 7.1310 to the dollar. The 20th National Congress of the Communist Party opens on Sunday and is expected to reaffirm Xi Jinping’s leadership. Services activity in China fell for the first time since May in September, disappointing expectations. “The yuan will likely trade between 7.0 and 7.2 in the near term,” said Qi Gao, a strategist at Scotiabank. ================================================= ===== Currency Bid Price at 2304 GMT Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $0.9733 $0.9732 -0.02% -14.41% +0.9739 +0.9728 Dollar/Yen 145.3800 145.2700 + 0.12% + 0.00% +145.4150 +145.4400 Euro / Yen 141.50 141.62 -0.08% + 0.00% +141.5700 +141.4700 Dollar / Swiss 0.9948 0.9949 + 0.01% +9.08% +0.9949 +0.9950 STERLING / DOLLAR 1.1073 1.1095 +1.1065 Dollar / Canadian 1.3742 1.3739 +0.02% +8.69% +1.3754 +1, 3725 AUSSIE / DOLLAR 0.6352 0.6366 -0.22% -12.62% +0.6375 +0.634 NZ / Dollar 0.5597 0.5594. Tokyo spots Europe spots Tokyo Volatilities spots BOJ Forex Market Information (Report by Tom Westbrook. Editing by Sam Holmes.)

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