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Dollar Displays Strength, Holds Near 3-week High

The U.S. dollar extended recent gains and stayed near three-week highs on Monday, riding on speculation that the Federal Reserve is very unlikely to announce a steep interest rate cut later this month.

Optimism about a substantial reduction in interest rate by the Federal Reserve faded on Friday after the Labor Department showed a much bigger than expected increase in job growth in the month of June.

For further clues about whether the Fed will cut interest rate this month or the quantum of cut if any, are likely to emerge after Jerome Powell's testimony before Congress on July 10 and 11.

The dollar index, which retreated a bit after advancing to 97.41, edged higher again and was last seen at 97.42, up 0.13% from previous close.

Against the euro, the dollar strengthened to $1.1207, gaining about 0.15%, after opening at $1.1235.

Survey data from the behavioural economics institute Sentix said euro area investor confidence weakened in July to its lowest level over four-and-a-half years, damping expectations of a rebound due to some de-escalation of trade tensions.

In Germany, industrial output grew 0.3% month-on-month in May, reversing a revised 2% fall in April. The rate of growth came in line with expectations. On a yearly basis, industrial output decreased 3.7% after easing 2.3% a month ago. Output was forecast to drop 3.2%.

Another report from Destatis said Germany's exports rebounded in May, advancing 1.1% month-on-month, in contrast to a 3.4% decrease in April. Shipments were forecast to advance 0.8%.

Meanwhile, imports dropped unexpectedly by 0.5%, following a 0.9% drop in April. Economists had forecast a 0.4%. In May, Germany's trade surplus increased to EUR 18.7 billion from EUR 16.9 billion in the previous month.

A monthly survey from Bank of France noted that France's economy is forecast to grow at a slightly slower pace of 0.2% in the second quarter. That was down from an earlier forecast for a 0.3% expansion.

The greenback was up 0.12% against Pound Sterling, with a unit of the latter fetching $1.2510, as against previous close of $1.2525.

The Japanese yen weakened to 108.76 a dollar, losing about 0.26%, after data released by the Cabinet Office on Monday showed core machine orders in Japan were down by a much bigger-than-expected 7.8% on month in May, at 842.9 billion yen. Economists had expected orders to fall 3.7% in May following the 5.2% increase in April.

On a yearly basis, core machine orders fell 3.7% versus expectations for a drop of 3.6% following the 2.5% gain in the previous month.

The dollar was up 0.11% against both Aussie and loonie, with the respective pairs trading at 0.6972 and 1.3096.

Against Swiss franc, the greenback gained about 0.3% at 0.9945. The Turkish Lira fell sharply against the dollar, as Turkey's President Recep Tayyip Erdogan fired the Governor of the central bank, Murat Cetinkaya, following his refusal to cut interest rates to help stimulate economic growth.

The Lira declined to a low of 5.7999 against the greenback, before recovering to 5.7374 a dollar, still down nearly 2% from previous close.

On Friday, data from the Labor Department showed that U.S. employment surged up by 224,000 jobs in June after edging up 72,000 jobs in May. Economists had expected employment to increase by about 160,000 jobs.

The focus is also on the minutes of the June FOMC meeting as well as closely-watched reports on consumer and producer price inflation, all due during the course of this week.

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