The dollar rose, snapping its worst two days since March, as a global bond rout stalled.
The greenback gained against most of its major peers as benchmark Treasury yields declined from eight-month highs and German bunds rose, halting a debt selloff that erased all of this year’s bond gains. A U.S. jobs report due Friday may support Federal Reserve plans to increase borrowing costs this year, burnishing the dollar’s allure. The euro slumped after Greece deferred a payment due to the International Monetary Fund on Friday.
“I don’t think we’ve seen the end of the dollar’s upswing,” Peter Hooper, chief economist at Deutsche Bank Securities Inc., said in an interview at the Institute of International Finance conference in New York. “As the economy picks up and the euro area continues with its quantitative-easing policy, this means further upward pressure for the dollar.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major peers, added 0.3 percent to 1,183.57 as of 5 p.m. in New York. The measure lost 1.5 percent in the two days through Wednesday.
The greenback added 0.3 percent to $1.1238 per euro, after its worst two days versus the currency in five years. It advanced 0.1 percent to 124.36 yen.
The dollar tumbled on Wednesday as traders revised expectations for euro-area growth and inflation after European Central Bank President Mario Draghi said consumer prices will start picking up later this year.
That sent German 10-year yields rocketing to the highest in eight months, narrowing the spread with U.S. Treasuries to the least since early February -- and eroding the appeal of U.S. assets.
“The bond-market selloff has been the main driver of activity in global foreign exchange markets for the better part of this week,” said Omer Esiner, chief market analyst at the currency brokerage Commonwealth Foreign Exchange Inc. in Washington. “Any strength in the dollar that we’re seeing is largely the result of some positioning and some profit-taking ahead of tomorrow’s payrolls.”
Traders are taking a breather before a payrolls report Friday that’s forecast to show employers added more than 200,000 jobs for a second-straight month. Investors are looking for a sign that March’s 85,000 increase was an aberration and that the Fed is still on track to raise borrowing costs this year.
“It seems the market is pretty optimistic” on payrolls, said Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG in New York. After the moves of the last two days, “we’re certainly not as squeezed as a couple of weeks ago, but maybe the market thought it was a little too much going into the number tomorrow.”
The Fed has held its interest-rate target at virtually zero since December 2008 to bolster the economy. The U.S. currency shrugged off comments from the IMF that U.S. economic growth is uneven and the Fed should delay increasing borrowing costs until 2016.
Greece became the first country to defer a payment to the IMF since the 1980s, delaying a debt payment of about $339 million due Friday and asking to bundle payments totaling about $1.7 billion due this month into one installment.