Dollar Reaches Highest Level Since July Ahead of Jobs Report

Updated on
  • Souring pound, loonie, Aussie among biggest losers on day
  • ECB minutes mention FX concern, reveal little on QE plans

The dollar rallied to its highest level since late July as traders unwound cross positions and prepared for non-farm payrolls data Friday.

The Bloomberg Dollar Spot index gained close to 0.6 percent., while the greenback advanced versus all of its G-10 peers. The euro, yen and Canadian dollar remained near the day’s lows against the dollar late in the session. The pound, the Aussie and the loonie were the biggest losers of the day. The key U.S. non-farm jobs data should show a gain of just 80,000, according to the median estimate in a Bloomberg survey, reflecting the negative effect of recent hurricanes.

  • Losses in the worst-performing G-10 currencies were driven by weak economic data. The pound fell to a one-month low against the dollar and a three-week low vs the yen after September U.K. auto sales, seen as a barometer of the domestic auto market, unexpectedly declined. Meanwhile, BOE member Ian McCafferty said the bank has reduced the chance of an “unwelcome surprise” for markets by signaling the possibility that it could soon raise interest rates. 
  • The Australian dollar extended losses after retail sales Down Under missed estimates, while the kiwi fell to a 4-month low vs the dollar. Loonie losses were fueled by a wider-than-expected trade deficit that testified to the struggles of the Canadian export sector, CIBC economist Nick Exarhos said in a note to clients
  • USD was bolstered as USTs sold off, sending 10-year Treasury yield to a high of nearly 2.36%. Philadelphia Fed President Patrick Harker said he has “penciled in” a rate hike for December, while San Francisco Fed President John Williams also endorsed higher rates, without commenting on timing. While the dollar has benefited from a string of positive U.S. economic data, the jobs report due Friday may be distorted
  • EUR/USD was trading near the 1.1700 level as ECB minutes released earlier gave little fresh insights into policy makers’ concerns on currency strength and plans to taper QE. EUR is trading below its 200-week moving average at 1.1712, which may have longer-term bearish implications. The shared currency may find technical support at the Tuesday low at 1.1696 or near its mid-August low at 1.1662
    • Traders continue to monitor the situation in Spain, where a Constitutional Court suspended a Catalan parliamentary session that was set for Monday, though separatists said the meeting will carry on as planned; separatists reportedly are stalling an independence push amid divisions among their leadership
  • USD/JPY was trading at ~112.86, not far from a session high of 112.92. Earlier, the pair had been weighed by yen demand tied to liquidation of GBP/JPY and EUR/JPY longs, according to a trader in London. Bids to buy USD/JPY at 112.30/35 helped support as the pair dropped to a daily low of 112.41
  • USD/CAD was also trading near a session high set later in the session at 1.2585. The Canadian dollar extended losses initially made after the Canadian August trade deficit ballooned to C$3.4b vs estimates for a C$2.6b deficit
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