The dollar held near a six-week high against the yen and in a tight range against the euro on Friday ahead of a closely-watched US payrolls report that could cast light on the US interest rate outlook.
The US payrolls report for August due at 1230 GMT is expected to show employers added 120,000 jobs during the month, suggesting modest but steady growth that would likely allow the Federl Reserve to leave rates on hold.
Given a slowing US growth outlook, investors expect the Fed to hold interest rates steady at 5.25 percent in September - a view reinforced by data on Thursday showing a lower-than-expected rise in a key measure of inflation.
"Our view is a bit stronger than expectations for payrolls - at 160,000 - would that be enough to radically change the view of the Fed? Probably not. But we could well have a look at $1.2750/1.2700 in euro/dollar," RBS currency strategist Adrian Schmidt said.
By 1146 GMT, the dollar was a touch lower at $1.2821 per euro, and was flat on the day at 117.27 yen having hit a six-week peak of 117.49 on Thursday.
The euro was broadly steady at 150.35 yen having hit a record high above 150.70 on Thursday.
Despite a survey on Friday that showed slowing growth in eurozone manufacturing, comments from European Central Bank President Jean-Claude Trichet on Thursday reinforced expectations a eurozone rate rise to 3.25 percent is likely in October.
The eurozone Purchasing Managers Index fell to 56.5 in August from 57.4 in the previous month. But other data showed domestic demand had driven quarterly eurozone economic growth at its fastest pace in six years in the second quarter.
Trichet signalled a near-term rate rise was on the cards when he said on Thursday "strong vigilance" was needed on inflation. "The message from Trichet was that we are going to have a hike in October and hike again in December. The data from the eurozone is not going to change that big picture," HSBC currency strategist Paul Mackel said.
Interest rates futures put the chances of a rate hike at the Fed's September 20 meeting at about 12 percent. "Markets in general are aligning with the Fed's view that you will see a moderation in growth which will rein in inflation," Barclays Capital currency strategist Adarsh Sinha said. Trading was expected to stay quiet until the release of the employment report and then die down quickly, with US markets closed on Monday for the Labour Day holiday.
Comments
Comments are closed.