An employee counts U.S. dollar bills at a

Dollar Hovers Below Two-Month Highs Ahead of U.S. Payrolls Report

The dollar index, which tracks the greenback against a basket of six major currencies, added 0.1% to 91.966 in Asia, slowly closing the gap to the high of 92.408 reached on June 18 after the Federal Open Market Committee shocked markets by predicting two interest rate hikes by end-2023.

The Fed commentary since then has put the focus on the data to determine when a tapering of asset purchases and higher rates would be appropriate, with Chair Jerome Powell saying a weak ago that policymakers would not act on just the “fear” of inflation, and will encourage a “broad and inclusive” job market recovery.

The U.S. Labor Department is expected to report a gain of 690,000 jobs in June, compared with 559,000 in May, and an unemployment rate of 5.7% versus 5.8% in the previous month, according to a Reuters poll of economists.

Investors are also looking at U.S. consumer confidence data on Tuesday and the Institute for Supply Management’s manufacturing index on Thursday for clues as to where interest rates are headed.

“Is it indeed that the dollar has bottomed and can only get stronger from here, or is it just a short-term positioning adustment? We’ve been arguing it’s more a function of the latter,” Paul Mackel, HSBC’s global head of foreign-exchange research, said in a conference call with journalists.

With countries reopening from the coronavirus pandemic, the dollar should weaken toward the end of this year, he said.

“That’s typically what happens when you have this synchronized global growth backdrop.”

The dollar weakened 0.06% to 110.545 yen, staying below a nearly 13-month high of 111.110 reached last week.

Both the dollar and yen benefited from some safe-haven demand as the more contagious Delta COVID-19 strain spread in Asia and elsewhere, stoking fears of further lockdowns.

The euro declined 0.07% to $1.19145, edging back toward the 2-1/2-month low of $1.8470 touched on June 18.

“The market had been positioned long of the single currency on optimism regarding the vaccine catch-up trade in the region (but) forecasts that the Delta variant of COVID could spread through Europe (in) the summer months could now be undermining confidence in this trade,” Rabobank strategist Jane Foley wrote in a report, cutting a one-month euro forecast to $1.19 from $1.20.

“Assuming the U.S. data remains broadly supportive, we expect the USD to grind moderately higher vs. the EUR though the course of the year.”

Elsewhere, sterling slipped back toward a two-month low, weakening 0.06% to $1.38695.

The Australian dollar, seen as a liquid proxy for risk appetite, fell 0.09% to $0.75580 after sliding 0.31% at the start of the week amid concerns over renewed COVID-19 lockdowns across parts of the country.

The kiwi dollar dropped 0.19% to $0.70280, adding to its 0.40% slide on Monday. Previously it enjoyed a five-day winning run after rebounding from the lowest level since November.

“We expect the RBNZ to start tightening monetary policy more than one year before the FOMC, which is a tailwind for the NZD,” CBA analyst Kim Mundy wrote in a client note.

“The RBNZ is the most hawkish central bank under our coverage.”

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Currency bid prices at 0532 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.1918 $1.1923 -0.04% -2.46% +1.1930 +1.1908

 

Dollar/Yen

110.5300 110.5500 +0.03% +7.06% +110.6300 +110.4700

 

Euro/Yen

131.72 131.90 -0.14% +3.78% +131.9400 +131.5900

 

Dollar/Swiss

0.9198 0.9200 +0.04% +4.02% +0.9207 +0.9196

 

Sterling/Dollar

1.3874 1.3880 -0.06% +1.53% +1.3882 +1.3859

 

Dollar/Canadian

1.2336 1.2342 -0.02% -3.09% +1.2348 +1.2333

 

Aussie/Dollar

0.7560 0.7565 -0.07% -1.72% +0.7570 +0.7550

 

NZ

Dollar/Dollar 0.7032 0.7042 -0.19% -2.12% +0.7051 +0.7023

 

 

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

 

(Reporting by Kevin Buckland; Editing by Shri Navaratnam and Himani Sarkar)