Dollar poised for biggest weekly gain since April, jobs report spotlights By Reuters

By Ankur Banerjee

SINGAPORE (Reuters) – The dollar hovered around a six-week high on Friday, set for its biggest weekly gain since April as demand for a safe haven from rising tensions in the Middle East.

Market activity is expected to be muted ahead of US non-farm payrolls figures – 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 rose marginally last week, as the U.S. labor market eased at the end of the third quarter.

For the payrolls data, economists polled by Reuters expect 140,000 job additions, while the jobless rate is expected to hold steady at 4.2 percent.

“There is little evidence to suggest a US crash landing on the horizon,” said Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities.

“Our sense is that risks to September non-farm payrolls are to the upside and should see USTs (US Treasuries) continue their upward yield strength.”

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%.

The euro held steady at $1.1034 after falling 1.18% so far this week, while the pound suffered losses after falling 1% on Thursday following dovish comments from the Governor of the Bank of England, Andrew Bailey.

The pound last touched $1.3131 on Friday, edging closer to a three-week low of $1.3093 hit on Thursday.

The U.S. jobs report comes as markets grapple with an improved U.S. economic picture and a more dovish tone from Fed Chairman Jerome Powell, who on Monday shook off some expectations that the Fed will move to tapering again interest rates next month.

Markets have a 33% chance the Fed will cut interest rates in November by 50 basis points (bps), down from 49% last week, CME’s FedWatch tool showed. The Fed cut interest rates by 50 bps last month.

A higher-than-expected September payrolls number could be viewed as benign, according to Kieran Williams, head of Asia FX at InTouch Capital Markets, as it would bring the unemployment rate in line with the Fed’s forecast for the end of 2024.

“That could lead some officials to consider a rate cut of 50 basis points in November. Even if (the wages data) is non-incident, the USD will face another round of key data next month, with yet another payrolls report due just before the November meeting. “

Investors this week focused on rising tensions in the Middle East, with oil prices rising and risk-sensitive currencies sliding.

The Aussie dollar was last up 0.14% at $0.6850 in early trade but was down 0.8% on the week, set for its first weekly decline in four weeks.

The New Zealand dollar was little changed at $0.62135, but down 2% on the week.

Investors are still digesting the slew of dovish comments from Japanese politicians and policymakers that reinforced the view that the Bank of Japan will not rush to raise interest rates.

Earlier this week, Japan’s new prime minister, Shigeru Ishiba, said the economy was not ready for further interest rate hikes, in surprisingly blunt remarks that pushed the yen lower.

The Asian currency fell 3 percent this week, its biggest weekly decline since November 2016, and hit a low since Aug. 20 of 147.25 per dollar. On Friday, the yen rose 0.2% to 146.63.