SINGAPORE (Reuters) – The US dollar hesitated above major support levels on Thursday, as traders waited for a batch of US economic data that could set the tone for central bank meetings later this month.
Investors have bet on the dollar falling as the world recovers from the COVID-19 pandemic, but they have recently become nervous about whether a surprisingly strong economic rebound in the United States poses a threat to a key assumption according to which interest rates remain low.
Mood has kept speculators from adding much to short positions in recent weeks. This put a damper on what a month ago seemed like a relentless downtrend and pushed trend-following traders into a wait mode.
Against the euro, the dollar traded at $ 1.2209 after unwinding a small rally on Wednesday. The greenback lost 1.7% against the euro in May, but did not break through the strong support at $ 1.2266. It was stable at 109.64 yen.
In Asia, the surprising gains of the Chinese yuan this week also sparked speculation about changes in Chinese policymakers’ stance on the currency, although it edged down to 6.3807 in early offshore trading on Thursday. [CNY/]
The Dollar Index, which measures the greenback against a basket of six major currencies, also held steady at 89.919 where it appears to have found strong support in recent weeks.
U.S. private payroll figures due later Thursday are the latest figures to offer clues to the state of the economy and a possible reading of the larger non-farm payroll data expected Friday. Appearances by a handful of Federal Reserve officials will also be closely watched for clues of sensitivity to the initial strength of the rebound ahead of their next meeting in mid-June.
“The major pairs (are) still stuck in ranges,” Singapore bank OCBC strategists said in a note. They added, however, that yield spreads appear to be moving in favor of the dollar and that the tone of policymakers is subtly changing.
Remarks by Fed Governor Lael Brainard this week, noting the risks to both sides of the Fed’s targets, offered “another signal that the Fed is slowly moving away from its overly accommodative stance,” the officials said. bank strategists Terence Wu and Frances Cheung.
“(We) maintain the view that Fed expectations should be phased in from here, unless key data is missing this week.”
The Fed’s overnight announcement of a decision to unwind holdings of corporate bonds purchased through an emergency facility last year offers another sign of the end of pandemic measures.
This leaves traders to focus on Friday’s employment data which, after a big failure in April, when the monthly hiring of 266,000 combined expectations per 1 million, has May estimates of between 400,000 and 1 million, with a consensus around 664,000.
“In view of last month’s disappointing report, the risk is that the results offer another surprise on the downside and weigh on the dollar,” said Carol Kong, analyst at the Commonwealth Bank of Australia.
The European Central Bank is also meeting next week, and investors are wondering if policymakers are signaling a slowdown in their bond buying program.
Currency bid price at 128 GMT
Description RIC Last closure US Pct Change YTD Pct High Bid Low Bid
$ 1.2210 $ 1.2210 + 0.00% -0.07% +1.2214 +1.2208
109.6400 109.5550 + 0.07% + 6.14% +109.6850 +109.6100
133.88 133.77 + 0.08% + 5.48% +133.9100 +133.7700
0.8981 0.8981 + 0.01% + 1.53% +0.8983 +0.8980
1.4172 1.4169 + 0.03% + 3.74% +1.4179 +1.4169
1.2035 1.2035 + 0.00% -5.49% +1.2041 +1.2031
0.7749 0.7752 -0.02% + 0.75% +0.7754 +0.7744
Dollar / Dollar 0.7237 0.7232 + 0.07% + 0.78% +0.7241 +0.7233
BOJ Tokyo Forex Market Information
(Reporting by Tom Westbrook; Editing by Shri Navaratnam)
Copyright 2021 Thomson Reuters.