SINGAPORE (Reuters) – The dollar wobbled towards its first steady week in three on Friday as traders looked to U.S. jobs data later in the day for clues to the extent to which and how fast the Federal Reserve might raise interest rates.
Markets blocked back-to-back 50 basis point hikes from the Fed in June and July, but the dollar was pushed this week by uncertainty about what will happen after that.
The dollar rose early in the week on nerves that record inflation in Europe was a harbinger of significantly higher rates everywhere. But it fell overnight and stocks rebounded as mixed US economic data clouded the outlook.
The dollar lost around 0.9% against the euro on Thursday, falling to $1.0750. It fell further to $1.0760 at the start of a holiday-thinned Asian session in China and Hong Kong. A vacation to Britain is also likely to reduce London’s trade.
In light activity, the dollar lost around 0.5% against the offshore yuan to hit 6.6170.
“Stock markets are pushing higher,” said Chris Weston, head of research at brokerage Pepperstone in Melbourne. “I think the stock market is effectively the horse and the dollar in this case is the cart.”
The S&P 500 index rose 1.8% on Thursday. [.N]
The risk-sensitive Australian and New Zealand dollars each rose more than 1% overnight, following gains in equities. After breaking resistance at $0.72, the Aussie rose another 0.1% to hit a six-week high at $0.7280 on Friday. [AUD/]
The dollar index was down 0.1% at 101.660 in early trading on Friday and is flat for the week – pausing a decline, after two consecutive weekly losses of more than 1%.
The yen has been kept under pressure by extremely low interest rates in Japan and they are unlikely to follow the rest of the world higher. The Japanese currency was stable at 129.80 to the dollar on Friday and lost 2% against the dollar this week.
The overnight data showed a weaker-than-expected increase in private hiring in the United States as well as a surprise drop in the number of jobless claims.
U.S. nonfarm payrolls data is due later Friday and while markets and central banks are currently focused on inflation, the labor market will guide wage expectations and sentiment regarding the strength of the economy as a whole.
“For equities right now, anything that could be seen as capping Fed tightening could be seen as supportive,” ING economist Rob Carnell said, adding that Treasuries and currency markets would then probably be inspired by actions.
The British pound held overnight gains at $1.2580. In cryptocurrencies, bitcoin was hovering around $30,000.
Bid rates for currencies at 0123 GMT
Description RIC Last US Close Pct Change YTD Pct Highest Bid Lowest Bid
$1.0755 $1.0746 +0.08% +0.00% +1.0762 +1.0745
129.7400 129.8700 +0.03% +0.00% +130.0300 +129.9050
139.53 139.59 -0.04% +0.00% +139.7700 +139.5400
0.9574 0.9576 -0.02% +0.00% +0.9580 +0.9568
1.2575 1.2578 -0.02% +0.00% +1.2590 +1.2575
1.2577 1.2568 +0.06% +0.00% +1.2577 +1.2558
0.7258 0.7265 -0.08% +0.00% +0.7283 +0.7257
Dollar/Dollar 0.6556 0.6558 -0.01% +0.00% +0.6576 +0.6557
BOJ Tokyo Forex Market Information
(Reporting by Tom Westbrook.; Editing by Shri Navaratnam)
Copyright 2022 Thomson Reuters.