By Karen Brettell
NEW YORK (Reuters) – The dollar rose to a six-week high on Thursday as data showed a still-solid U.S. economy ahead of Friday’s closely watched jobs report, while demand for safe havens came amid concerns about rising tensions in the Middle East and the impact of a dock worker. The strike has also given the currency a boost.
The dollar has also benefited from milder central bank expectations built into currencies such as the euro, sterling and yen.
Data on Thursday showed US service sector activity rose to a year-and-a-half high in September amid strong growth in new orders, although the measure of service sector employment fell, in line with a slowdown in the labor market.
“Today is an example of how quickly the U.S. dollar can recover,” said Juan Perez, trading director at Monex USA in Washington. Although Thursday’s numbers were “a little shrinking,” the U.S. remains the envy of other countries, he said.
Other data on Thursday showed that the number of Americans filing new claims for unemployment benefits rose marginally last week, but the fury of Hurricane Helene in the southeastern US and strikes at Boeing (NYSE:) and ports could change the picture. could distort the labor market in the short term.
The price last rose 0.33% to 101.98 and reached 102.09, the highest level since August 19. On September 27, the price reached a 14-month low of 100.15.
“The dollar has gained some ground this week… in part it’s just the markets trying to navigate a lot of opposing flows,” said Vassili Serebriakov, FX & macro strategist at UBS in New York.
Improving economic data and more hawkish statements from Federal Reserve Chairman Jerome Powell on Monday have tempered expectations that the Fed will cut rates by another 50 basis points at its Nov. 6-7 meeting.
Friday’s jobs report for September is the next major US economic release that could influence Fed policy. Economists polled by Reuters expect 140,000 jobs to be added, while the unemployment rate is expected to remain stable at 4.2%.
“The US data has firmed up a bit, which probably makes the market a bit more cautious about selling the dollar ahead of the non-farm payrolls report,” Serebriakov said.
Traders are now pricing in a 35% probability of a 50 basis point cut next month, up from 49% a week ago, according to CME Group’s (NASDAQ:) FedWatch Tool.
The US currency has benefited from a security bid since Israel was attacked by Iran on Monday in an attack that raised fears the oil-producing Middle East could become embroiled in a wider conflict.
Oil prices rose on Thursday on concerns that oil flows from the region could be disrupted. When US President Joe Biden was asked on Thursday whether he would support Israel in attacking Iran’s oil facilities, he told reporters: “We are discussing that.”
Long lines of container ships also appeared outside major U.S. ports on Thursday as the largest dockworkers’ strike in nearly half a century entered its third day, preventing unloading and threatening shortages of everything from bananas to auto parts.
“The US dollar is a safe haven in the midst of chaos,” Perez said. “In the post-pandemic world, the biggest concern has been: can we rebuild healthy supply chain logistics? And this front-page news completely destroys that stability and health.”
The euro has fallen on growing expectations that the European Central Bank will cut interest rates at its Oct. 17 meeting as inflation eases.
The price fell 0.17% to $1.1026 and fell to $1.1008, the lowest level since September 12.
Sterling tumbled after Bank of England Governor Andrew Bailey said the British central bank could move more aggressively to cut interest rates if inflation pressures continue to weaken.
The British pound last fell 1.15% to $1.3114, reaching $1.3093, its lowest level since September 12.
The dollar also hit a six-week high against the yen as Bank of Japan board member Asahi Noguchi said Japan’s central bank must act cautiously and slowly to avoid hurting the economy.
It comes after Prime Minister Shigeru Ishiba said on Wednesday that Japan is not in an environment for an additional tariff increase.
The dollar last rose 0.27% to 146.85, having previously reached 147.25, its highest level since August 20.
In cryptocurrencies, bitcoin fell 0.36% to $60,687.91.
