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Dollar on tenterhooks as payrolls test looms

A picture illustration shows U.S. 100-dollar bank notes taken in Tokyo August 2, 2011. REUTERS/Yuriko Nakao/File Photo

The U.S. dollar was wavering above major support levels on Thursday, as traders awaited a batch of U.S. economic data that could set the tone at central bank meetings later this month.

Investors have bet on the dollar falling as the world recovers from the COVID-19 pandemic, but they have lately grown nervous over whether a surprisingly strong U.S. economic rebound poses a threat to a key assumption that interest rates stay low.

The mood has kept speculators from adding much to short positions in recent weeks. That has put the brakes on what had a month ago seemed like a relentless downtrend and has pushed trend-following traders into a wait-and-see mode.

Against the euro the dollar traded at $1.2209 after unwinding a small Wednesday rally. The greenback lost 1.7% on the euro in May, but did not fall past strong support at $1.2266. It was steady at 109.64 yen .

In Asia, startling gains in the Chinese yuan this week had also sparked speculation about shifts in Chinese policymakers’ stance on the currency, although it eased slightly to 6.3807 in early offshore trade on Thursday .

The dollar index , which measures the greenback against a basket of six major currencies, also held at 89.919 where it seems to have found strong support in recent weeks.

U.S. private payrolls figures due later on Thursday are the latest numbers to offer clues on the state of the economy and a possible read on broader non-farm payrolls data due on Friday. Appearances by a handful of Federal Reserve officials will also be closely watched for hints of sensitivity to the early strength of the rebound ahead of their next meeting in mid June.

“The major pairs (are) still stuck within ranges,” said strategists at Singapore’s OCBC Bank in a note. They added, however, that yield differentials seem to be moving in the dollar’s favour and that policymakers’ tone is subtly shifting.

Remarks from Fed Governor Lael Brainard this week noting risks to both sides of the Fed’s goals offered “another signal that the Fed is slowly moving away from its excessively dovish stance,” said the bank’s strategists, Terence Wu and Frances Cheung.

“(We) retain the view that Fed expectations should be gradually built in from here, barring any key data misses this week.”

The Fed’s overnight announcement of a move to unwind corporate bond holdings bought through an emergency facility last year offers another sign of pandemic measures coming to an end.

That leaves traders to focus on Friday’s jobs data which following a big miss in April, when monthly hiring of 266,000 confounded expectations for 1 million, has May estimates ranging between 400,000 and 1 million, with consensus around 664,000.

“Given last month’s disappointing report, the risk is the results deliver another downside surprise and bears down on dollar,” said Commonwealth Bank of Australia analyst Carol Kong.

The European Central Bank also meets next week and investors are focused on whether policymakers signal any slowdown in their bond buying programme.

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Currency bid prices at 128 GMT

Description	RIC	Last	U.S. Close Previous Session	Pct Change	YTD Pct Change	High Bid	Low Bid
Euro/Dollar		$1.2210	$1.2210	+0.00%	-0.07%	+1.2214	+1.2208
Dollar/Yen		109.6400	109.5550	+0.07%	+6.14%	+109.6850	+109.6100
Euro/Yen		133.88	133.77	+0.08%	+5.48%	+133.9100	+133.7700
Dollar/Swiss		0.8981	0.8981	+0.01%	+1.53%	+0.8983	+0.8980
Sterling/Dollar		1.4172	1.4169	+0.03%	+3.74%	+1.4179	+1.4169
Dollar/Canadian		1.2035	1.2035	+0.00%	-5.49%	+1.2041	+1.2031
Aussie/Dollar		0.7749	0.7752	-0.02%	+0.75%	+0.7754	+0.7744
NZ Dollar/Dollar		0.7237	0.7232	+0.07%	+0.78%	+0.7241	+0.7233