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The dollar held onto seven-week highs against major currencies on Tuesday as investors weighed the impact of a strong U.S. jobs report on the possibility of rate cuts, while heightened tensions in the Middle East dampened risk sentiment.

Traders have adjusted their expectations for Federal Reserve easing this year, with markets now pricing in a reduced chance of rate cuts in November and December.

The dollar’s strength has been supported by a shallower path of cuts from the Fed, strong data, and the possibility of a scenario where the labor market remains strong despite cooling Inflation.

Federal Reserve Bank of St. Louis President Alberto Musalem voiced support for more rate cuts, but emphasized the need for cautiousness in monetary easing.

Investors are awaiting the Inflation report on Thursday and the release of the Fed’s September meeting minutes on Wednesday to gauge further monetary policy direction.

Elsewhere, China equity markets returned from a break, while the yuan weakened against the dollar.

In the currency markets, the euro and pound remained near recent lows, while the yen strengthened slightly after recent losses.

Japanese Prime Minister Shigeru Ishiba’s comments on rate hikes caused uncertainty over the Bank of Japan’s future actions, pushing the yen lower.

In other currencies, the Australian dollar slipped to its lowest since September, while the New Zealand dollar remained flat ahead of a monetary policy decision on Wednesday.

Overall, the dollar’s strength, coupled with global geopolitical concerns, continues to influence currency market movements.

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