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Dollar Up Near Two Week High, Employment Data Could Hold Next Fed Clue

ForexMay 06, 2021 12:40AM ET
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By Gina Lee – The dollar was up on Thursday morning in Asia, remaining just below a two-week high ahead of a U.S. jobs report that could provide further clues on when the U.S. Federal Reserve will start scaling back its unprecedented stimulus measures.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.02% to 91.308 by 12:33 AM ET (4:33 AM GMT).

The USD/JPY pair edged up 0.16% to 109.36.

The AUD/USD pair was down 0.25% to 0.7728 and the NZD/USD pair inched down 0.07% to 0.7208.

The USD/CNY pair edged up 0.11% to 6.4799.

The GBP/USD pair inched down 0.03% to 1.3899 ahead of the Bank of England handing down its policy decision later in the day. Some investors expect the central bank to begin tapering its bond-buying program on the back of a COVID-19 vaccination-driven economic recovery in the U.K.

Recently released, largely positive U.S. economic data has boosted the greenback from a one-month low over the past week. However, investors continue to wonder whether a rise in inflation could force the Fed to change its monetary policy earlier than predicted.

"The dollar is likely to continue to respond to the debate about whether or not the Fed’s view that inflation will be transitory is correct," Rabobank strategist Jane Foley said in a note.

With several forecasters predicting a one-million-plus increase in non-farm payrolls forming part of the employment record, "the dollar may continue to find a good level of support in the near-term" with the currency strengthening to $1.19 per euro over a one-month horizon, she added.

The euro hit the psychologically important $1.20 mark earlier in the day after dropping to $1.1986 during the previous session for the first time since Apr. 19.

Fed Chairman Jerome Powell has so far argued that the labor market is well short of where it needs to be in order to begin talking about tapering asset purchases, with the central bank not looking to raise its benchmark Fed funds rate through 2023.

Powell’s message was corroborated by other Fed officials, three of whom spoke on Wednesday alone. One of them, Boston Fed President Eric Rosengren, said although inflation will be temporarily distorted in spring 2021 as the U.S. economy works through imbalances caused by COVID-19, it will be short-lived and should not lead to a pullback in monetary policy.

The Fed’s comments follow U.S. Treasury Secretary Janet Yellen’s comment on Tuesday that rate hikes could be necessary to stop the economy from overheating, although she issued a clarification later that day.

"Despite constant reassurances from Yellen and an array of Fed officials that the coming increase in inflation will prove 'transitory'... markets are evidently a bit more worried," National Australia Bank (OTC:NABZY) strategist Rodrigo Catril said in a note.

In cryptocurrencies, ether traded at $3,462.62 after hitting a record $3,559.97 on Tuesday, while Bitcoin hovered near the $56,755-mark.

Dollar Up Near Two Week High, Employment Data Could Hold Next Fed Clue

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josiah samuel
josiah samuel May 06, 2021 8:26AM ET
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by what time will GBP market bullish tomorrow
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