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Read for 4 minutes (Reuters) – SINGAPORE (Reuters) – On Friday, the US dollar hit a 15-month high versus the yen and multi-month highs against other major currencies, as speculators bet that solid US labor statistics would push it much higher. PHOTO FROM THE FILE: On March 20, 2019, an employee at a money exchange in central Cairo, Egypt, counts US dollar bills. Mohamed Abd El Ghany/REUTERS At 1230 GMT, the jobs data is expected to show a strong increase of 700,000. However, there is speculation that the figure could be considerably higher, unsettling the notion that interest rates in the United States will remain at historic lows for years. In a letter to clients, DBS Bank strategist Philip Wee wrote, “The dollar has started July well; a U.S. non-farm payrolls meet or exceed today would maintain that momentum.” The dollar has gained 0.7 percent against the yen this week, reaching its highest level since March 2020 in the Asia session, as speculators re-evaluate short positions in the wake of months of solid data and a change in tone from the Federal Reserve. Early in the Asian session, the dollar climbed to 111.65 yen, and the euro was only a smidgeon below Thursday’s three-month high of $1.1841 per euro. It climbed to a new two-and-a-half-month high of $1.3752 per British pound, and was trading near $0.7461 against the Australian dollar, its best level since December. The dollar index now stands at 92.564, up 3.4 percent from its four-month low in May. The Australian dollar, New Zealand dollar, euro, and yen are all trading below their 200-day moving averages against the dollar, with the yen trading far below it after losing over 7.5 percent this year. In an outlook call, Paul Mackel, global head of FX research at HSBC, stated, “Many people are now disputing (about) whether the dollar has actually bottomed, because the Fed is signaling that it could be hiking interest rates at some point in 2023.” “There’s also some concern about whether the dollar will begin to act in a more pro-cyclical fashion, meaning that if data in the United States is stronger than expected, the dollar would benefit.” UNPREDICTABLE The road to the payrolls report has been littered with pleasant surprises, with private payrolls in the United States exceeding estimates and unemployment claims falling faster than expected. However, in the past, such preliminaries have shown to be unreliable guides for a data set that is difficult to forecast. A poll of 63 economists by Reuters found an average projection of 700,000 jobs, with forecasts ranging from 376,000 to over a million. ING and Royal Bank of Canada Capital Markets are among numerous firms that have predictions that are below consensus. “The dollar has a tendency in 2021 to display an uneven reaction to payrolls,” said Francesco Pesole of ING. “A miss generated greater dollar downside compared to the upside created by a stronger-than-expected statement.” “Should our economist’s estimates for a positive but below-consensus read come true, we expect the dollar’s price action to be generally negative as some of the Fed’s hawkish views are scaled down.” When it comes to exporters’ currencies, commodity prices are also tilting against the dollar, particularly those sensitive to the oil price, which has risen 46 percent this year. The Canadian dollar, for instance, is down for the week but is the best-performing G10 currency this year, rising 2.5 percent against the dollar in 2021. According to analysts, this is likely contributing to the yen’s recent depreciation as Japan pays for imports. “It’s basically a formula for yen weakness,” said Shusuke Yamada, Bank of America’s senior Japan FX strategist, who believes the risks are balanced ahead of the payrolls test. “Even if the dollar/yen has climbed… (with) stronger payrolls, I believe the (dollar/yen) might reach 112.” ======================================================== At 0500 GMT, currency bid prices were set. RIC RIC RIC RIC RIC RIC Pct Change in the Last U.S. Close YTD Pct High Bid Lowest Bidder Previous Alteration Session Dollar/Yen111.5850 111.5550 +0.02 percent +8.03 percent +111.6550 +111.5800Euro/Yen132.17 132.15 +0.02 percent +4.14 percent +132.2200 +132.1000Dollar/Swiss$1.1844 $1.1851 -0.05 percent -3.05 percent +1.1853 +1.1841Dollar/Yen111.5850 111.5550 +0.02 percent +8.03 percent +111.6550 + 0.9261 0.9257 +0.05 percent +4.68 percent +0.9265 +0.9258Sterling/Dollar1.3771 1.3764 +0.06 percent +0.81 percent +1.3776 +1.3752Dollar/CanadianDollar/CanadianDollar/CanadianDollar/CanadianDollar/CanadianDollar/CanadianDollar/CanadianDollar/CanadianDollar/Can 1.2431 1.2437 -0.05 percent -2.38 percent +1.2444 +1.2430Aussie/Dollar0.7466 0.7471 -0.05 percent -2.93 percent +0.7470 +0.7461NZ$0.7466 0.7471 -0.05 percent -2.93 percent +0.7470 +0.7461NZ$ Dollar/Dollar 0.6967 0.6969 -0.01 percent -2.96 percent +0.6970 +0.6960 -0.01 percent -2.96 percent -0.01 percent -2.96 percent -0.01 percent -2.96 percent Each and every location Locations in Tokyo Locations in Europe VolatilitiesTokyo Forex market data from BOJReporting from Singapore by Tom Westbrook. Kevin Buckland contributed additional reporting from Tokyo, and Himani Sarkar edited the piece./nRead More

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