Dollar Reaches Three-Week High as Jobs Data May Firm Fed Timing

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U.S. jobs data is set to define the course for the dollar as investors look to the labor market to determine the timing of the Federal Reserve’s first increase in interest rates since 2006.

The Bloomberg Dollar Spot Index touched a three-week high before the U.S. government’s June payrolls report due Thursday that economists said will show employers added 233,000 jobs in June. The greenback slipped against the euro as Greece prepared for Sunday’s referendum on its creditors’ demands.

“A strong read should reinforce demand for the dollar,” said Ipek Ozkardeskaya, a market analyst at London Capital Group. “Traders will likely refrain from holding risk positions before the Greek referendum weekend.”

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 of its major peers, added 0.1 percent as of 7:14 a.m. New York time, reaching its highest level since June 8. The gauge is up 5.3 percent this year, even after a 1.7 percent loss in the second quarter.

The dollar climbed 0.3 percent to 123.50 yen. It slipped 0.2 percent to $1.1073 per euro, after advancing 1.7 percent over the previous two days.

U.S. financial markets will be closed Friday for a national holiday.

The dollar has strengthened versus 13 of its 16 major counterparts this year as the Fed scrutinized data for signs the world’s largest economy could withstand an increase in interest rates. It’ll continue to strengthen versus all but two of those peers through year-end, according to analyst estimates compiled by Bloomberg.

Attractive Dollar

Investors are betting the Fed’s main rate will be little changed at 0.25 percent in three months and climb to 0.41 percent in six months, according to data compiled by Bloomberg, suggesting one 25-basis point increase by year-end.

“U.S. data is improving and pushing U.S. yields higher and making the dollar more attractive,” said Robert Rennie, global head of currency and commodity strategy at Westpac Banking Corp. in Sydney. “Concerns about Greece have faded from view for the moment while the world waits for the results of Sunday’s vote.”

A GPO poll cited by said 47 percent leaned toward a “yes” vote in Greece’s referendum, which would be an endorsement of austerity and the international bailout. The “no” camp, the government’s position rejecting those terms, was 43 percent. The margin of error in the survey of 1,000 people was 3.1 percentage points.

“A positive payrolls report will spur dollar buying and yen selling on rate-hike expectations,” said Daisuke Karakama, chief market economist at Mizuho Bank Ltd. in Tokyo. “But I am a bit doubtful how much more the dollar can rise ahead of the Sunday vote.”

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