The dollar rallied from a three-month low as traders speculated stronger U.S. employment growth will renew expectations for higher interest rates.
The greenback climbed versus most of its major peers before a report on Friday that’s expected to show a pick-up in the jobs market, after lower-than-forecast gains in March. The euro fell from its highest in two months as turmoil in Europe’s debt markets eased, lessening the appeal of assets denominated in the 19-nation currency compared with those in dollars.
“Tomorrow’s number will tell us a lot about what’s going on in the economy,” Sireen Harajli, a strategist at Mizuho Bank Ltd. in New York, said by phone. “If we get a good number tomorrow, the dollar will get a nice boost. But I’m not sure how long it will last, given the overall weakness that we’re seeing.”
The Bloomberg Dollar Spot Index advanced for the first time in three days, adding 0.4 percent to 1,165.876 as of 4 p.m. in New York, after touching its lowest since Feb. 6 on Wednesday.
The euro weakened 0.7 percent to $1.1267, after rising to its highest level since Feb. 23. The dollar added 0.3 percent to 119.74 yen.
U.S. employers hired 230,000 workers last month, according to the median of 95 analysts surveyed by Bloomberg News before the report due Friday.
Traders are looking for signs the U.S. economy is strong enough to withstand the Federal Reserve’s first rate increase since 2006. Fewer Americans than forecast applied for unemployment benefits last week, dropping the average over the past month to the lowest in 15 years, a report showed Thursday.
“Payrolls will be a very important number,” Mike Moran, a senior strategist in New York at Standard Chartered Plc, said by phone. “It’ll really give us a much clearer read on the strongest part of the U.S. economy, which is undoubtedly the labor market.”
U.S. Treasuries rallied, with 30-year bonds climbing for the first time in five days, as a global debt selloff that wiped $436 billion off the global fixed-income market moderated. Italian and Spanish government bonds rose, erasing earlier losses, while yields on German bunds were little changed.
The European Central Bank’s program of quantitative easing has weighed on bond yields around the region in recent months, encouraging investors to move their money into stocks or overseas. Some of that trade is now being pared back, according to Ilya Feygin, a New York-based managing director and senior strategist at WallachBeth Capital LLC.
“The QE trade is to be long equities, short the euro and long European bonds,” he said by phone, where a long position is a bet on an asset rising in value while a short position is the reverse. “All of those are connected and they’re all crowded. Therefore as soon as there’s a little bit of risk off, all three trades come off.”