Dollar Rally Pauses as Markets Brace for US Nonfarm Payrolls Test

Dollar Rally Pauses as Markets Brace for US Nonfarm Payrolls Test

  • The dollar temporarily slows down as traders await the U.S. nonfarm payrolls data after a series of strong U.S. economic reports.
  • After a selloff, world government bond markets find stability, with U.S. Treasury yields tempering their climb.
  • The euro and sterling weaken against the dominant dollar, while the Australian and New Zealand dollars recover from earlier declines triggered by central bank decisions.

Oct.6:The dollar took a breather on Friday, with traders largely staying on the sidelines in both currency and U.S. Treasury markets, awaiting the release of U.S. nonfarm payrolls data later in the day for potential catalysts.

This closely-watched jobs report follows a series of robust U.S. economic data, reinforcing the Federal Reserve’s hawkish stance on higher-for-longer interest rates, which had propelled the greenback and U.S. Treasury yields upward.

The dollar index, which reached an approximately 11-month peak of 107.34 earlier in the week, settled at 106.37 but remained on course for its 12th consecutive week of gains.

Rodrigo Catril, senior FX strategist at National Australia Bank, noted, “There’s an element here of just taking stock ahead of what should be a very important data release. U.S. Treasury yields and the dollar have been very reactive to positive data releases from the U.S., so there’s potential for fireworks tonight.”

World government bond markets, which experienced a broad selloff, also stabilized on Friday, with the 30-year U.S. Treasury yield at 4.900%, following a spike above 5% earlier in the week. The 10-year Treasury yield stood at 4.7269%, and the two-year yield was at 5.0267%.

The pause in the dollar’s rally offered relief to the yen, which stood at 148.48 per dollar. A brief spike to 147.30 per dollar on Tuesday had fueled speculation of Japanese market intervention, although Bank of Japan data suggested otherwise.

Vishnu Varathan, head of economics and strategy at Mizuho Bank, cautioned that potential intervention levels should be approached cautiously by currency traders.

Meanwhile, the euro dipped 0.03% to $1.0546, heading for a weekly decline of 0.25% over 12 weeks. Sterling slipped 0.03% to $1.2188, facing five consecutive weeks of losses against a strong dollar.

Thierry Wizman, Macquarie’s global FX and interest rates strategist, noted, “The backdrop remains one in which the Fed is sticking its hawkish neck out much further than the European Central Bank, Bank of England, Reserve Bank of Australia, and BOJ.”

The Australian dollar fell 0.05% to $0.6367, while the New Zealand dollar gained 0.11% to $0.59695, as both Antipodean currencies recovered from earlier declines triggered by central bank decisions. The RBA and the Reserve Bank of New Zealand held interest rates steady, though with less hawkish messaging than anticipated. The Aussie was poised for a weekly drop of over 1%, and the kiwi for a more than 0.5% fall.

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Ingrid Mueller

Ingrid Mueller, a literary expert with a Ph.D. in Literature from Yale University, brings a touch of artistry to her writing. Her critical analyses and cultural insights provide a fresh perspective on trending news. Ingrid's articles are a treat for those seeking a deeper understanding of the world around them. Explore the trends through her unique lens.

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