Dollar set for profits:He dollar It held around a six-week high on Friday, on track for its biggest weekly gain since April on safe-haven demand amid rising tensions in the Middle East.
Market activity is expected to be subdued ahead of US nonfarm payrolls numbers due later in the day, which will help shape the Federal Reserve’s outlook for interest rates.
Data on Thursday showed that the number of Americans filing new claims for unemployment benefits increased marginally last week, with the US labor market sliding at the end of the third quarter.
For payrolls data, economists polled by Reuters expect 140,000 jobs to be added, while the unemployment rate is expected to hold steady at 4.2 percent.
“There is little evidence to suggest a US hard landing is on the horizon,” said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.
“Our sense is that the risks to September nonfarm payrolls are to the upside and should cause USTs (US Treasuries) to continue their upward momentum in yields.”
The dollar index =USD, which measures the US unit against six peers, was last at 101.92, not far from the six-week high of 102.09 it hit on Thursday. For the week, the index is up 1.5 percent.
The euro EUR=EBS was steady at $1.1034 after falling 1.18 percent so far this week, while the British pound GBP=D3 was recovering losses after falling 1 percent on Thursday following dovish comments from Bank of England Governor Andrew Bailey.
On Friday, the pound last hit $1.3131, standing near the three-week low of $1.3093 it hit on Thursday.
The U.S. jobs report comes as markets grapple with an improving U.S. economic outlook and a more hawkish tone from Fed Chair Jerome Powell, who on Monday dashed some expectations that the Fed will make big interest rate cuts again next month.
Markets are pricing in a 33 percent chance that the Federal Reserve will cut interest rates in November by 50 basis points (bps), up from 49 percent last week, the CME FedWatch tool showed. The Federal Reserve cut interest rates last month by 50 basis points.
A better-than-expected September payrolls figure could be considered dovish, according to Kieran Williams, head of Asia FX at InTouch Capital Markets, as it would align the unemployment rate with the Federal Reserve’s forecast for the end of 2024.
“This may lead some officials to consider a 50bp rate cut in November. Even if (the payrolls data) passes without incident, the USD will face another round of key data next month, with one more payrolls report fair before the November meeting.”
Investor attention this week has been on rising tensions in the Middle East, with oil prices rising and risk-sensitive currencies falling.
The Australian dollar AUD=D3 was last up 0.14 percent at $0.6850 in early trading but was down 0.8 percent on the week, heading for its first weekly decline in four weeks.
The New Zealand dollar NZD=D3 was little changed at $0.62135, but is down 2 percent on the week.
Investors are still digesting the plethora of dovish comments from Japanese politicians and authorities that have reinforced the view that the Bank of Japan will be in no rush to raise interest rates.
Earlier this week, Japan’s new Prime Minister Shigeru Ishiba said the economy was not prepared for further rate hikes, in surprisingly blunt comments that sent the yen lower.
The Asian currency JPY=EBS has fallen 3 percent this week, its biggest weekly drop since November 2016 and hit its lowest level since Aug. 20 of 147.25 per dollar. On Friday, the yen rose 0.2 percent to 146.63.
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