LONDON, Nov 9 (Reuters) - The US dollar nudged lower on Monday after posting its biggest gain in nearly six months on Friday as robust US jobs data boosted bets for higher interest rates, with wider market sentiment improving to start the week.
The dollar also got support from a rout in AI stocks at the end of last week that drove investors to seek out safe-haven assets. AI jitters however eased on Monday and a 1.3% drop in Brent crude futures after US President Donald Trump downplayed the likelihood of renewed strikes on Iran also boosted sentiment.
The US dollar index , which measures the currency against six major rivals, dipped 0.3% to 101.88. Still, it was not far below levels hit on Friday when the dollar rallied almost 0.8% as stronger-than-expected data showed jobs growth accelerated in October while the unemployment rate fell.
"We think the dollar rally requires the risk-off mood to persist this week. Otherwise, there is some moderate correction risk, as Friday’s move looked a bit too stretched relative to short-term market drivers," Francesco Pesole, FX strategist at ING, said, adding that the macro backdrop should prevent the dollar from falling to last week's lows and pointing to US consumer inflation data, which is due Tuesday.
The euro was last 0.4% higher at $1.1187, after slumping 0.7% on Friday and hitting a low of $1.1132, not far from the trough from a week earlier at $1.1105, the weakest since May 2025.
Sterling rose 0.5% to $1.3411 and the dollar eased 0.3% to 157.99 yen following Friday's 0.6% jump.
The risk-sensitive Australian and New Zealand dollars also rallied on Monday after pulling back at the end of last week. The Aussie rose 0.5% to $0.6899 and New Zealand's kiwi jumped 1% to $0.5602, with traders also weighing the implications of too-close-to-call weekend elections in New Zealand.
FED RATE OUTLOOK IN FOCUS
Tuesday's US consumer price index data is expected to show a monthly rise of 0.3%, according to a Reuters poll.
"That should help cement expectations for a December Fed hike," ING's Pesole said.
Futures imply around 81% odds the US Federal Reserve will raise rates on December 9, higher than a week earlier, according to CME Group's FedWatch tool.
Bets on Fed tightening next month had been receding amid the rout in global tech stocks as investors worried about the outlook for AI investment, profitability and regulations, particularly after Democrats swept the US midterm elections earlier this month.
"The Blue Sweep has put the AI trade to the test given risks for heavier AI regulation and a slowdown in the CAPEX cycle. At the same time, however, economic realities continue to surprise to the upside — data momentum remains very strong across indicators," Barclays strategists wrote in a report. "This combination is yet to dent the dollar's appeal."
Comments from Fed officials on Friday also supported views for a rate hike.
Reporting by Sophie Kiderlin in London and Kevin Buckland in Tokyo; Editing by Chris Reese and DJ Yap
