Dollar rises, investors await US jobs data

The dollar rose to a one-week high against a basket of currencies on Thursday as traders closed out profitable bets against the greenback before Friday's US payrolls report which may confirm the view the Federal Reserve will not raise interest rates soon. The dollar index, which measures the US dollar's value versus six currencies, fell to its lowest in over 15 months on Tuesday, led by the yen's surge partly on skepticism about whether Japan policy-makers would intervene to slow its rise.
"We are seeing some shortcovering lifting the dollar against most major currencies. You can largely attribute it to tomorrow's nonfarm payrolls report," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida. Trading volume was thin as Japanese markets were shut for the Golden Week holiday. They will reopen on Friday.
Economists polled by Reuters forecast US employers likely added 202,000 workers in April following a 215,000 increase in March with the jobless rate holding at 5.0 percent. "So, while the technicals have been shaping up fairly nicely the past few days, you can't ignore the disruptive possibility that the April US labor market report brings," Christopher Vecchio, currency analyst at DailyFX in New York. Steady monthly job gains have yet to prompt a pickup in wage growth, which remains a worry for the Federal Reserve.
In the absence of higher wage growth, together with sluggish global demand, Fed policy-makers will likely keep policy rates unchanged in June, which would renew bets the dollar would fall, analysts said. The futures market implied traders see a 14 percent chance the Fed will hike rates in June, little changed from Wednesday, Reuters data showed. The dollar index was last up 0.65 percent at 93.777.
The greenback was up 0.2 percent at 107.23 yen after hitting a 18-month trough on Tuesday. Japanese authorities have said they could step into the currency market to halt the yen's rise if needed, but investors are skeptical as to whether such intervention would have a lasting impact. The euro also weakened against the dollar. It fell 0.8 percent to $1.1395, pulling further away from a 16-month high set on Tuesday. Among other major currencies, the Australian dollar rose earlier on data that showed the country's trade deficit shrank sharply in March before its gains faded, leaving it flat on the day at $0.7460. It hit a seven-week low of $0.7447 on Wednesday in the wake of a rate cut by the Reserve Bank of Australia.