Investing.com – The dollar edged lower against a basket of the other major currencies on Monday as the pound rebounded after last week’s slump and the Turkish lira was pressured lower by a simmering diplomatic crisis between the U.S. and Turkey.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, edged down to 93.52 by 08:22 AM ET (12:22 GMT), pulling back from Friday’s more than two-month high of 94.10.
The dollar remained on the defensive amid renewed worries over tensions with North Korea following reports that Pyongyang is preparing to test a long-range missile that it is believed could reach the west cost of the U.S.
The dollar was steady against the safe haven yen, with USD/JPY last at 112.69. On Friday the dollar rose to 113.43, the most since July 14 before retreating.
Demand for the dollar continued to be underpinned after higher than expected wage growth in the U.S. jobs report for September was seen as potentially boosting inflation.
The U.S. economy lost 33,000 jobs in September, the Labor Department reported Friday, but the decline was driven by slower hiring due to the effects of Hurricanes Irma and Harvey.
The unemployment rate fell to 4.2%, the lowest since 2001 and average hourly earnings rose 2.9% from a year earlier.
The uptick in wage inflation bolstered expectations that the Federal Reserve will hike interest rates in December.
The euro was a touch higher against the dollar, with EUR/USD edging up 0.1% to 1.1743.
The pound moved higher, with GBP/USD advancing 0.77% to 1.3166.
The recovery came after sterling ended the previous week down almost 2.5%, the largest weekly decline in more than a year as concerns over divisions in British Prime Minister Theresa May’s government over Brexit weighed.
Elsewhere, the Turkish lira remained sharply lower against the U.S. dollar on Monday but was off the weakest levels of the session after the U.S. and Turkey mutually suspended visa services between the two countries on Sunday.
The move effectively blocks Turks from travel to the U.S., and vice versa, indefinitely.
USD/TRY was last up 2.9% at 3.7201 after jumping as high as 3.7487 overnight, the most since mid-March.
The suspension of visa services comes after last week’s arrest of a U.S. embassy employee in Istanbul for alleged involvement in the July 2016 coup attempt against President Recep Tayyip Erdogan. Washington has dismissed the allegations as baseless.
The lira was also lower against the euro, with EUR/TRY last at 4.3671, up 2.97% after rising to a record high of 4.4015 overnight.
Trade volumes remained light on Monday, with markets in Japan shut for a holiday. U.S. stocks markets were due to trade, though the bond market was closed for the Columbus Day holiday.