The dollar held steady on Friday as investors awaited the currency market's most closely watched data set of the month, the US non-farm payrolls report, for clues as to whether US interest rates will rise this year. The dollar was flat against a basket of major currencies, having fallen 0.4 percent on Thursday - its worst performance in two weeks - after a surprise contraction in US manufacturing cast some doubts on the strength of economic growth.
The result was a setback for dollar bulls, who had bet solid US data this week would cement the case for a Federal Reserve rate hike, possibly as soon as September. The US labour market data due at 1230 GMT is expected to show employers added 180,000 jobs in August, according to the median estimate of 91 economists polled by Reuters. That would keep alive the view that US interest rates will increase by the end of the year.
Markets are pricing in a less than 1 in 4 chance of a tightening at the Fed's next meeting on September 21-22. A hike by the end of the year is around 55 percent priced in, up from less than 50 percent before Fed officials signalled last week at a meeting of central bankers that a 2016 hike was possible. "We've done some travelling (in rate expectations)... so I can see the dollar trundling higher on today's data," said Kit Juckes, macro strategist at Societe Generale in London. "It would take quite a lot for the market to suddenly decide that they're going to go... twice by the end of the year."
The Swedish crown hit a one-year low of 9.6210 crowns per euro after a run of weak economic data fanned fears of a steeper-than-expected economic slowdown and that the central bank will delay planned interest rate hikes. Some analysts said that news that the world's biggest company, Apple, would repatriate billions of dollars of global profits to the United States next year would lend support to the dollar at the margins.
But Commerzbank currency strategist Thu Lan Nguyen, in Frankfurt, was sceptical. "Yes, if they move a large amount ...but all in all I'm very doubtful that a single corporation is able to sustainably move an exchange rate such as the US dollar," she said. The greenback rose 0.3 percent to 103.50 yen, close to the five-week high of 104 yen hit on Thursday. The euro hit a five-week high against the Japanese currency, of 116.05 yen.