Read for 4 minutes (Reuters) – LONDON (Reuters) – On Wednesday, the dollar was headed for its greatest monthly gain since March, boosted by traders’ apprehension ahead of erratic US labor data and concerns over the spread of the Delta coronavirus type. A banker counts out four thousand dollars at a bank in Westminster, Colorado, according to a file photo. Wednesday, November 3, 2009. Rick Wilking/REUTERS/File Photo 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. Through June, it had increased by 2.5 percent. 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. “We suspect the market will be on edge over any strength in the US labor market that would encourage Fed hawkishness,” ING said in a note to clients. “Last month, a 978k increase did not prove to be a particularly accurate predictor for the NFP figure (+559k), but we suspect the market will be on edge over any strength in the US labor market that would encourage Fed hawkishness.” The average expectation for Friday’s non-farm payrolls is for a gain of 690,000 jobs, but there is a wide range of estimates, ranging from 400,000 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. Sterling was unchanged at $1.3832. [GBP/] Ritvik Carvalho contributed reporting; Tom Westbrook contributed additional reporting in Singapore; and Andrew Heavens edited the piece. Continue reading