4 Minute Read* FX rates around the world are depicted graphically. Reuters/tmsnrt.rs/2RBWI5ELONDON, 30 JUNE (Reuters) – On Wednesday, the dollar was on track for its greatest monthly gain since November 2016, boosted by traders’ apprehension ahead of unpredictably volatile US labor data and concerns over the spread of the Delta coronavirus type. This month, the dollar has gained approximately 2.5 percent against a basket of currencies, largely as a result of the Federal Reserve’s unexpectedly hawkish rate stance. If labor data this week provides signs as to the pressure on policymakers, traders believe it might move substantially in either direction. After the Australian and New Zealand dollars fell approximately 0.7 percent versus the dollar on Tuesday, and the Canadian dollar fell nearly 0.5 percent, risk-sensitive and commodity-exposed currencies suffered the most losses on Wednesday. In the European session, they remained stable, as did the safe-haven currencies of the Japanese yen and Swiss franc, which held their ground into Tuesday. The euro was trading at $1.1900, the yen at 110.49 per dollar, and the Australian dollar was trading at $0.7518, all close to recent lows against the dollar. After touching a one-week high of 92.194 on Tuesday, the US dollar index, which measures the greenback against a basket of six major currencies, was stable at 92.041. With this week’s release of US labor data, the near-term forecast for the dollar will be put to the test. Signs of strength might increase inflationary pressure on policymakers, causing them to move faster on rate hikes, while a miss could add some wiggle room to the timeframe. Private payrolls are due later on Wednesday, but the primary focus will be on Friday’s more comprehensive labor numbers. Private payrolls are expected to increase by 600,000 in June, according to economists polled by Reuters, down from 987,000 a month ago. “While the dollar may be exposed to potential data disappointments today,” said Valentin Marinov, head of G10 FX research at Credit Agricole, “we anticipate that any losses in the currency would be bought ahead of the more crucial non-farm payroll news on Friday.” The average expectation for Friday’s non-farm payrolls is 700,000 new jobs, but the range of the 83 estimates is wide, ranging from 376,000 to over a million. A new rise in global coronavirus infections, as well as restricted attempts to prevent them, kept currency swings in check. As the contagious Delta variant spreads, case numbers are breaking daily records in Indonesia, lockdowns are being extended in Malaysia and expanded in Australia, and British travelers are facing further restrictions. Currency markets appeared to be transitioning from carefully watching the ebb and flow of risk sentiment to a higher sensitivity to interest rates, according to Paul Mackel, global head of FX research at HSBC, creating a shakeout that has strengthened the dollar. During an outlook call, Mackel told reporters, “There’s been a lot of speculative build-up of short dollar positions over the previous couple of months, and we think that these are being washed out.” Last week, statistics indicated the largest drop in the value of bets against the dollar in three months, boosting the greenback as shorts bought dollars to close positions. Ritvik Carvalho contributed reporting; Tom Westbrook in Singapore contributed further reporting; Andrew Heavens and Chizu Nomiyama edited the piece. Continue reading
