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By 4 Minute Read* The dollar index has risen to its greatest level since April 6th* The Australian dollar has fallen to its lowest level since December* FX rates around the world are depicted graphically. Reuters, tmsnrt.rs/2RBWI5ELONDON, 1 JULY The dollar index rose to three-month highs on Thursday, ahead of a jobs data from the United States that could indicate when the Federal Reserve will begin to reduce stimulus. The dollar surged to 111.165 yen for the first time since March 26, 2020, before trading flat against the yen, which was at 111.095 on Wednesday. In early European trade, the dollar index, which measures the greenback against six currencies, climbed to 92.496, its highest level since April 6. In June, the index had its best month since November 2016, thanks to the Federal Open Market Committee’s (FOMC) surprising hawkish move in the middle of the month, when policymakers signaled two rate rises by the end of 2023. Traders are hoping for confirmation of that outlook in Friday’s U.S. nonfarm payrolls report, with economists surveyed by Reuters anticipating a gain of 700,000 jobs last month, up from 559,000 in May, and an unemployment rate of 5.7 percent, down from 5.8 percent the previous month. The dollar gained more ground on Wednesday after data indicated that private payrolls in the United States expanded by 692,000 jobs in June, more than predicted. “In the case of a beat rather than a miss, one might expect a larger dollar reaction,” said Calvin Tse, head of CitiFX’s North American FX strategy. “Should the number come in much higher than projected, the markets are likely to take it as indicating that the Fed’s expected strong labor market is occurring sooner than expected.” Markets, on the other hand, may overlook a lower number, he added, especially if there is indication that labor supply, rather than demand, is the issue. Tse said that recent Fed communications have downplayed supply-driven weakness. The euro fell to $1.1851 after falling below $1.1837 for the first time since April 6 on Thursday. In Asia, the benchmark 10-year US Treasury yield fell to 1.4630 percent before rising to 1.4747 percent. The development of the extremely contagious Delta version of the new coronavirus, which threatens the global recovery narrative, has boosted safe-haven assets such as Treasuries, the dollar, and the yen. Outbreaks are being fought in Australia, Indonesia, Malaysia, and Thailand, and Portugal and Spain have imposed restrictions on unvaccinated British tourists. The Australian dollar, which is viewed as a barometer of risk appetite, fell 0.2 percent to $0.7476, its lowest level since December 21, with Sydney, Brisbane, Perth, and Darwin all on lockdown. The Reserve Bank of Australia will meet on Tuesday to make policy choices, and officials have already hinted that it will reveal decisions on its three-year yield target as well as its larger quantitative easing program, which will finish in September. In a departure from usual practice, RBA Governor Philip Lowe will address a press conference thereafter. In a client note, Commonwealth Bank of Australia strategist Joseph Capurso wrote, “If the RBA maintains a dovish bias and does not take a move toward eliminating unorthodox monetary policy, AUD is unlikely to recuperate losses experienced since the FOMC meeting.” “AUD will remain heavy for at least the next few weeks,” he predicted, with the currency perhaps touching $0.7442. Sterling fell 0.1 percent to $1.3819, approaching a two-month low of $1.37865. Ritvik Carvalho contributed reporting; Kevin Buckland contributed further reporting in Tokyo; and Barbara Lewis edited the piece./nRead More

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