Dollar drifts higher as markets await jobs data for Fed clues

By Tom Westbrook

SINGAPORE (Reuters) – The dollar was supported on Friday in the lead up to the release of U.S. employment data, as markets braced for the numbers that could make the case for faster U.S. policy tightening at a time when action in Europe and Japan remains distant.

The euro has lost about 0.3% on the dollar this week and was last drifting lower at $1.1825. It has failed in a few recent attempts to breach resistance around $1.1910.

The dollar is also perched at a one-week high of 109.84 Japanese yen, after bouncing solidly from a low of 108.72 that it touched on Wednesday. The U.S. dollar index inched up to 92.316 and is 0.26% higher so far this week.

Fed Vice Chair Richard Clarida’s comments this week that conditions for a rate hike could be met in late 2022 have only served to underscore the focus on jobs.

“It certainly feels this is a big jobs report that carries real meaning,” said Chris Weston, head of research at broker Pepperstone in Melbourne, both for the economy and rates.

Weston thinks a figure north of a million could send the dollar and U.S. yields sharply higher, while a number under 650,000 could rattle nerves, though perhaps not the dollar if it benefits from investors’ risk-aversion.

Consensus expectations, from a Reuters survey of 80 economists, is for 870,000 jobs to have been added last month, though predicting hiring amidst a pandemic is a guessing game and estimates range from 350,000 to 1.6 million.

Adding to the murkiness has been a mixed bag of U.S. data through the week, with a surprisingly weak ADP report on private hiring, but an encouraging dip in jobless claims and the strongest ever reading for services activity.

The data is due at 1230 GMT.

The dollar drifted marginally higher on the Aussie, sterling and the kiwi.

Sterling rose to $1.3949 overnight after the Bank of England left policy settings untouched but outlined a path to tapering and tightening over years to come.

It last bought $1.3920. [GBP/]

The kiwi, the best performing G10 currency this week, is up 1% for the week and holding on above 70 cents at $0.7042 after very strong employment data has investors expecting the Reserve Bank of New Zealand to hike rates the week after next. [NZD/]

The Aussie is rangebound and last at $0.7390, with neither a record trade surplus nor hawkish surprise from the Reserve Bank of Australia enough to give it more than a modest lift.

Also on Friday, besides the jobs data, are Reserve Bank of Australia economic projections due at 0130 GMT and German industrial output numbers due around 0600 GMT.