Dollar under pressure ahead of key US jobs data: Markets close

(Bloomberg) — The dollar weakened and U.S. stock futures slipped as traders braced for U.S. jobs data that could determine the size of the Federal Reserve’s interest rate cut this month.

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Bloomberg’s rating of the greenback fell for a third day on speculation that a worse-than-expected payrolls result could prompt the Fed to cut by 50 basis points this month. Most Asian currencies strengthened, led by the yen and the Philippine peso. Asian stocks were mixed, while Hong Kong stock trading was closed due to a typhoon.

There is limited event risk to worry about in Asia “so again the session will be defined by further pre-positioning ahead of US payrolls,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “Traders will use screen time to review, measure and manage positioning and exposures, as well as potential market volatility that may increase.”

Treasury yields edged lower in Asia, adding further downward pressure on the greenback. The benchmark 10-year yield fell one basis point to 3.71%. The so-called whisper number for payrolls among Bloomberg terminal users suggests an addition of just 155,000 workers for August, below the average economist estimate of 165,000.

Currency traders haven’t been this buoyant ahead of a US jobs report in more than a year. Options used to gauge the dollar’s swings against its main trading partners hit their highest level since March 2023. So-called risk reversals, a barometer of market positioning, show bearish sentiment for the US currency and some traders moves away from short. -term bets altogether, given the uncertainty.

Interest rate swaps show a roughly 35 percent chance the Fed will cut by 50 basis points when it meets Sept. 17-18. However, a quarter point discount is still favored by many traders and remains the most popular call among economists.

Currency strategists see a strong chance for the yen to test its August high against the dollar if the wages data boosts bets for a 50 basis point move.

The yen “is where the action will be” if there is any surprise in the numbers, said Gareth Berry, strategist at Macquarie Group Ltd. in Singapore. The dollar will be in “deep trouble” against Japan’s currency if the unemployment rate rises. to 4.4%, he said.

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The impact of the typhoon

Hong Kong halted trading in its $4.9 trillion stock market on Friday as the city extended a storm warning due to Super Typhoon Yagi, which bypassed the region overnight towards southern China.

Elsewhere in Asia, China could face new export controls on critical technologies from the Biden administration. Washington has restricted China’s ability to access cutting-edge technologies needed for artificial intelligence over fears that the advanced chips and components could give Beijing a military advantage.

Chinese brokerage stocks gained after two of the biggest state-backed brokers said they were looking to combine. Analysts said the merger could encourage other firms to follow suit.

Speakers Fed

Traders are also awaiting comments from two Fed speakers later Friday. New York Fed President John Williams and Fed Governor Christopher Waller are scheduled to make comments following the payrolls numbers.

“The danger in ‘bad news’ is that even if the Fed is prepared to react aggressively, it may be too late to avoid real economic weakness,” said Steve Sosnick of Interactive Brokers. “But there is concern that if the news is ‘too good,’ the Fed may be reluctant to cut rates as quickly as the market expected.”

Oil headed for its biggest weekly loss in nearly a year on concerns about weak demand and ample supply, even as OPEC+ delayed a planned production hike by two months. Gold was little changed as traders digested the latest US data. Iron ore remains on track for worst since March with little sign of recovery for China’s steel market.

Key events this week:

• Eurozone GDP, Friday

• US non-farm payrolls on Friday

• The Fed’s John Williams speaks on Friday

Some of the main movements in the markets:

Stocks

• S&P 500 futures were down 0.3% at 6:41 a.m. London time

• Japan’s Topix down 1.3%

• Australia’s S&P/ASX 200 rose 0.3%

• Shanghai Composite fell 0.4%

• Euro Stoxx 50 futures fell 0.3%

• Nasdaq 100 futures fell 0.6%

• Australia’s S&P/ASX 200 rose 0.3%

Coins

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro was little changed at $1.1115

• The Japanese yen rose 0.7 percent to 142.48 per dollar

• The offshore yuan rose 0.1 percent to 7.0814 per dollar

• The Australian dollar fell 0.3% to $0.6720

• The British pound was little changed at $1.3173

Cryptocurrencies

• Bitcoin rose 0.6% to $56,392.19

• Ether rose 0.5% to $2,380.16

BONDS

• The 10-year Treasury yield fell two basis points to 3.71%

• Japan’s 10-year yield fell 1.5 basis points to 0.855%

• Australia’s 10-year yield fell three basis points to 3.89%

commodities

• West Texas Intermediate crude fell 0.1% to $69.06 a barrel

• Spot gold rose 0.1% to $2,519.77 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Richard Henderson.

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