Dollar at two-decade high as payrolls loom
SINGAPORE — The dollar was headed for a
third weekly gain in a row and stood near its highest levels for
decades on the euro and yen on Friday, with investors in little
mood for selling ahead of U.S. labor data that could bolster
the case for interest rate hikes.
A solid U.S. manufacturing survey overnight was enough to
push the greenback above 140 yen for the first time since 1998
and it also hit a 2-1/2 year high against sterling and six week
highs on the Australian and New Zealand dollars.
Against the stronger dollar, the euro fell back
below parity and at $0.9956, it was not far from last week’s
20-year low of $0.99005. The yen steadied at 139.91
per dollar after making a trough of 140.27 in early Asian
The dollar index made a two-decade top at 109.99 in
New York trade and was last at 109.56. It is up more than 1% in
the week since Federal Reserve Chair Jerome Powell said at
Jackson Hole, Wyoming that rates would need to be high “for some
time” to control inflation, somewhat surprising markets.
Sterling fell 0.7% overnight and is down about 1.5%
this week. It was last at $1.1552 after touching $1.1499
The Australian and New Zealand dollars are each down about
1% on the week, with the Aussie last at $0.6792 and the
kiwi flirting with $0.6077, its lowest levels since the
onset of the pandemic in 2020, when the U.S. dollar soared.
“We had thought that the slowing of the economy would be
enough to pause Fed hiking by November but Powell’s clear nod to
restrictive policy points to a higher bar to a pause,” said
Steve Englander, head of G10 FX research at Standard Chartered.
“We think U.S. labor data would have to slow dramatically
to deter a 75 basis point policy rate hike,” he said.
Non-farm payrolls data is due at 1230 GMT and economists
expect 300,000 jobs were added in August, which would extend a
strong run of data. A surprise well below 275,000 would be
needed to change the rates outlook, Englander said.
Fed funds futures are pricing about a 75% chance
that the Fed hikes rates by 75 bps next month and it has been a
week of heavy selling in the Treasury market, lifting two-year
yields by 12 bps and 10-year yields by 23 bps.
The two-year yield hit a 15-year high of 3.551% overnight
and the 10-year hit a 2-1/2 month high of 3.297%.
The moves have supported the dollar’s march on the yen in
particular, since Japan’s yields are anchored near zero.
Japan’s government was watching currency moves with an acute
sense of urgency, Chief Cabinet Secretary Hirokazu Matsuno said
Central bank meetings are due in Europe and Australia next
week and markets expect hikes. Traders see about a 60% chance of
a 50 bp hike in Australia and an almost 80% chance
of a 75 bp hike from the European Central Bank.
Currency bid prices at 0117 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar $0.9957 $0.9946 +0.10% -12.43% +0.9960 +0.9941
Dollar/Yen 140.0050 140.1700 -0.07% +21.78% +140.2500 +139.9250
Dollar/Swiss 0.9807 0.9815 -0.07% +7.53% +0.9819 +0.9807
Sterling/Dollar 1.1551 1.1544 +0.07% -14.58% +1.1559 +1.1538
Dollar/Canadian 1.3148 1.3156 -0.07% +3.98% +1.3159 +1.3145
Aussie/Dollar 0.6795 0.6786 +0.15% -6.51% +0.6801 +0.6785
NZ 0.6075 0.6078 -0.07% -11.27% +0.6089 +0.6073
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook; Editing by Ana Nicolaci da Costa)