By Ankur Banerjee
SINGAPORE, Jan 5 (Reuters) - The dollar was steady on
Friday, heading for its strongest weekly performance since July
on scaled back expectations of steep and early interest rate
cuts this year ahead of closely watched U.S. payrolls data later
in the day.
U.S. private employers hired more workers than expected in
December, data showed on Thursday, pointing to persistent
strength in the labour market that should continue to sustain
the economy.
That helped the dollar shrug off weakness and against a
basket of currencies, the U.S. currency was last at
102.39 in early trade on Friday. The dollar index is up 1% for
the week, its strongest performance since the week ending July
23.
The dollar's rebound will be tested by the nonfarm payrolls
report due later in the session. Economists polled by Reuters
forecast that 170,000 jobs were created in December, fewer than
the 199,000 in November.
"The USD strength we are seeing at the start of 2024 may
have more to do with safe-haven demand as equity markets have
struggled and market volatility has increased," said Hamish
Pepper, fixed income and currency strategist at Harbour Asset
Management.
Traders have dialled back rate cut bets, with markets now
pricing in a 65% chance of a rate cut in March, compared to 86%
chance a week earlier, CME FedWatch tool showed. They are also
pricing in less than 140 basis points of cuts this year versus
160 basis points at the end of December.
Some analysts still see market expectations as too
aggressive.
The dollar is likely to be supported by an increase in U.S.
rates, relative to the rest of the world, as "Fed rate cut
expectations prove too aggressive," Pepper said.
"While core PCE inflation has dropped quickly to around 3%,
this is not the 2% that the Fed targets and the last mile may
require policy rates to stay at more elevated levels for longer
than anticipated." Inflation, as measured by the personal
consumption expenditures price index, rose 2.6% in the 12 months
through November.
The dollar's ascent has seen the Japanese yen
weaken considerably this week, with the Asian currency down 2.5%
against the dollar, on course for its weakest weekly performance
since June.
On Friday, the yen weakened 0.06% to 144.72 per dollar,
having touched a more than two-week low of 144.90 earlier in the
session.
The euro was last up 0.09% at $1.0953, on track
for 0.8% decline in the week, snapping a run of three weeks of
gains. Sterling was last at $1.2694, up 0.12% on the
day, but still on course for a small decline for the week.
In cryptocurrencies, bitcoin dropped 0.91% to
$44,082.61. Ether fell 0.53% to $2,263.75.
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Currency bid prices at 0123 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar $1.0952 $1.0944 +0.08% -0.77% +1.0956 +1.0945
Dollar/Yen 144.7850 144.6550 +0.10% +2.66% +144.8900 +144.6600
Euro/Yen
Dollar/Swiss 0.8492 0.8502 -0.12% +0.90% +0.8504 +0.8492
Sterling/Dollar 1.2690 1.2682 +0.07% -0.27% +1.2695 +1.2680
Dollar/Canadian 1.3353 1.3350 +0.03% +0.73% +1.3359 +1.3349
Aussie/Dollar 0.6707 0.6707 +0.01% -1.62% +0.6713 +0.6704
NZ 0.6236 0.6236 +0.06% -1.25% +0.6241 +0.6230
Dollar/Dollar
All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ
(Reporting by Ankur Banerjee in Singapore; Editing by
Jacqueline Wong)