Investing.com – The U.S. dollar edged lower on Friday as activity was subdued ahead of the widely watched monthly U.S. jobs report, and the Japanese yen was set for more than a year from next week.
At 04:25 ET (08:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 105.110, on track for its worst week in almost two months.
Dollars in arrears before payrolls
The dollar trailed for most of this week after the Fed chairman largely ruled out rate hikes. This indicated that the US central bank was still leaning towards possible interest rate cuts, even though these could take longer to materialize than initially expected.
“The post-FOMC bias has been clearly bearish on the dollar, and despite today’s US payroll risk event, markets continued to squeeze long USD yesterday and overnight,” ING analysts said in a note.
Attention now turns to the closely watched US monthly employment report.
is likely to have increased by 238,000 jobs last month, following a rise of 303,000 in March, while employment remains below 4% for the 27th month in a row.
Powell made clear the importance of the coming economic data for policy decisions, after the US central bank left interest rates unchanged on Wednesday.
Financial markets continue to expect the central bank to start its easing cycle in September, but strong data could see this window start to close.
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“Overall, our call of 210,000 salaries means we don’t expect today’s numbers to dent bearish dollar momentum as markets can fully absorb a cut in September and keep short-term USD rates at a ceiling,” ING added to.
Eurozone production is still weak
In Europe, the rate was 0.2% higher at 1.0743, helped by recent dollar weakness.
However, recent economic news from the eurozone has hardly helped, with a decline of 0.3% compared to March, according to data released earlier Friday.
According to Thursday’s final release, the eurozone manufacturing sector remained in contraction territory in April, while the association VDMA reported that German manufacturers deepened a decline in their order books in March.
It has signaled a rate cut in June, but there remains a lot of uncertainty about what happens next with monetary policy.
traded 0.2% higher at 1.2555, following the issue’s release.
This showed a rise to 55.9 in April, up from 53.1 the previous month, suggesting that Britain’s dominant services sector is still in a healthy state, potentially giving the Bank of England room to cut interest rates to postpone.
Yen on track for big weekly gains
In Asia, the price fell 0.2% to 153.26, with the pair on track to post a weekly loss of over 3%, the biggest loss since December 2022.
Japanese authorities have been linked this week to interventions to support their currency to the tune of about 9.16 trillion yen ($59.8 billion), according to data from the Bank of Japan.
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These forays into the currency market tended to take place during periods of low liquidity, with the country going on holiday on Monday, while the second attempt came late on Wednesday, after Wall Street closed.
“The second round of JPY intervention in one week, initiated after a less aggressive than expected FOMC on Wednesday, has sent a message to markets that the Treasury is less tolerant of a post-intervention yen depreciation this time ,” said ING. .
Broader Asian currencies rose slightly, benefiting from an overnight decline in the dollar.
pair rose 0.3% to 0.6579 as markets positioned for potentially aggressive signals next week. Warmer-than-expected Australian inflation data meant markets largely priced in expectations of any rate cuts from the RBA in 2024, providing some strength for Australians.
