The dollar found some respite on Friday after steep quarterly losses against major rivals, as investors awaited a US nonfarm payrolls report that could give clues to the monetary policy outlook. Against the yen, the dollar slipped about 0.3 percent to 112.28 after skidding more than 6 percent in the first quarter, its biggest loss since the third quarter of 2009, as market turmoil sent investors into the perceived safety of the Japanese currency.
That trend continued on Friday, after a downbeat business survey helped send Japan's Nikkei stock index plunging on the first day of the country's fiscal year. The Bank of Japan's quarterly tankan survey of business confidence, published earlier on Friday, showed large manufacturers' business sentiment deteriorated to its lowest level in nearly three years and was expected to worsen in the coming quarter.
Large manufacturers expect the dollar to average 117.46 yen in the fiscal year which began on Friday, the tankan survey showed. The dollar dropped as low as 112.06 in the morning session, before bouncing back. "The 112 level is holding up, and people were buying on the dip, so there is clearly some real demand for dollars around this level," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
The euro was steady at $1.1376, after gaining more than 4 percent for the quarter and hitting a more than 5-month high of $1.4120 on Thursday. The dollar index, which tracks the greenback against a basket of six rival currencies, edged up about 0.1 percent to 94.677, after shedding more than 4 percent in the first quarter for its worst performance since the third quarter of 2010.
It notched a five-month low of 94.319 in the previous session. On Tuesday, Fed Chair Janet Yellen highlighted risks to the global economy in a speech, and said the Fed should proceed "cautiously" on raising interest rates, quashing the hopes of those who expected a hike sooner rather than later. Lower US yields undermined the dollar, as Treasuries marked their best quarter in 4-1/2 years. The nonfarm payrolls report is expected to show that employers added 205,000 jobs in March.
"We believe that dollar bulls will be sorely disappointed by tomorrow's report for a number of reasons," Kathy Lien, managing director at BK Asset Management in New York, said in a note to clients on Thursday. "Non-farm payrolls is only important when it can be a game changer for Federal Reserve policy but Janet Yellen made it very clear that they have no intention of raising interest rates in April and unless there's significant improvements at home and abroad, rates will remain steady in June as well," Lien said.
After Yellen's speech, interest rates futures implied a majority of traders saw only a 5 percent chance of a rate increase at the Fed's next policy meeting on April 26-27. The Australian dollar edged down about 0.1 percent to $0.7647, but remained not far from a nine-month peak of $0.7723 set on Thursday, underpinned by surprisingly upbeat Chinese manufacturing surveys. Aided by a dovish Fed, the Aussie gained 7.2 percent last month, its largest monthly rise since 2011. Chinese manufacturing activity expanded in March for the first time in nine months, with the official Purchasing Managers' Index (PMI) squeaking above the boom-or-bust threshold to 50.2. A private PMI survey also beat forecasts and rose to its highest in 13 months.
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