Dollar in Limbo Before U.S. Payrolls as Traders Seek Clue on Fed

Japan Is at a Reflection Point, Says Rosenstreich
  • Nonfarm positions rose 180,000 last month: Bloomberg survey
  • Dollar gauge fluctuates by smallest amount in a week

The dollar’s stuck in limbo, moving the least in a week, as investors await key U.S. labor data to assess whether Federal Reserve policy makers will be able to follow through on plans to raise interest rates in coming months.

The Bloomberg Dollar Spot Index has swung between gains and losses this week as traders anticipate Friday’s release of the government’s monthly labor statistics, which may revive bets on a Fed rate hike by year-end. The U.S. currency barely budged from Wednesday’s closing levels even after the Bank of England cut borrowing costs for the first time since 2009, sending the pound tumbling.

The Bank of England’s actions don’t "mean anything for the Fed and it doesn’t mean anything for the U.S. dollar,” said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. “What is going to be important for the Fed is the non-farm payrolls. Despite what Fed speakers have been saying, the bar for a rate hike this year is high.”

Bloomberg’s Dollar Spot Index, which tracks the U.S. currency against a basket of its major peers, was little changed at 5 p.m. in New York, after advancing Wednesday on a private report showing that U.S. companies added 179,000 jobs last month, beating economists’ estimates. The dollar was practically unchanged at 101.22 yen, and gained 0.2 percent to $1.1130 per euro.

Jobs Report

The Labor Department’s monthly report due Friday will show U.S. employers added 180,000 jobs in July, according to the median forecast in a Bloomberg survey. That would follow an increase of 287,000 in June.

“There is clearly downside risk to the dollar, with all eyes on jobs data,” said Chris Weston, chief market strategist at IG Ltd. in Melbourne.

Futures signal that traders don’t expect the Fed to tighten policy until the second half of 2017, after liftoff from near zero in December. At the start of last week, traders were looking for that move as soon as March, then pushed out those bets after data showed second-quarter U.S. gross domestic product expanded at less than half the pace forecast by economists.

“A solid July nonfarm payrolls report, with strong job gains and wage growth, will support a modest upward revision to U.S. interest-rate expectations in favor of the dollar,” said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia in Sydney.

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