Dollar at two-decade high as payrolls loom


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SINGAPORE — The dollar was headed for a

third weekly gain in a row and stood near its highest levels for

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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.

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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

trading.

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

overnight.

The Australian and New Zealand dollars are each down about

1% on the week, with the Aussie last at $0.6792 and the

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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

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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

on Friday.

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.

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Currency bid prices at 0117 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

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

Euro/Yen

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

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; Editing by Ana Nicolaci da Costa)

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