Dollar Up, Resumes Rally Against Yen Ahead of U.S. Jobs Report

© Reuters.

By Gina Lee

Investing.com – The dollar was up on Friday morning in Asia, extending a rally against the yen. Investors now await the latest U.S. jobs report that could indicate the probability of a U.S. Federal Reserve interest rate hike in May 2022.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.15% to 98.510 by 11:41 PM ET (3:41 AM GMT).

The USD/JPY pair rose 0.84% to 122.69.

TheAUD/USD pair inched up 0.05% to 0.7484 while the NZD/USD pair edged down 0.13% to 0.6925.

The USD/CNY pair edged up 0.18% to 6.3517. Chinese data released earlier in the day showed that the Caixin manufacturing purchasing managers index for March was 48.1.

The GBP/USD pair inched up 0.01% to 1.3134.

The greenback’s safe-haven status also gave it a boost, as peace talks between Ukraine and Russia to end the war that was triggered by the Russian invasion on Feb. 24 faded. The talks will resume later in the day.

Meanwhile, the Fed will next meet to discuss its monetary policy on May 5, with CME Group's (NASDAQ:CME) FedWatch tool predicting a 71% chance of a half-point hike in interest rates.

The dollar index built on Thursday's 0.50% climb after falling to a four-week low of 97.681 mid-week. It "has underwhelmed lately but showed some backbone overnight and upside potential remains in scope amid ongoing waves of fiercely hawkish Fedspeak and an aggressive frontloaded profile that includes almost 100 bps in hikes over the Fed's next two meetings," Westpac analysts said in a note.

The index could top the 100 mark "in coming weeks", the note predicted. The second Fed meetings will take place from June 14 to 15.

Investors now await the latest U.S. jobs report, including non-farm payrolls, due later in the day.

The dollar gained against the yen, its first in four days as the USD/JPY tracked moves in long-term U.S. Treasury yields. It is little changed for the week after a three-week 6.5% surge.

"The case for USD/JPY going much higher is still compelling as the Fed's rate hikes will revolutionize the hedging arithmetic for JPY-based investors and sensitivity to hedging costs is rising," RBC Capital Markets analysts said in a note.

"Little of this flow is likely to have happened yet and the rally in March has been driven largely by investors outside Japan anticipating domestic JPY selling. If positioning cleans up, we will revert to buying dips in USD/JPY,” the note added.

Meanwhile, the euro trod water at $1.10690, after its sharp drop from a one-month high of $1.11850 during the previous session as hopes for a de-escalation in the Ukraine war fade. However, it is still on course for a 0.82% weekly gain. In cryptocurrencies, bitcoin fell 0.93% to $45,093.74, sliding 3.78% in the week to date. It hit the $48,234 mark on Monday for the first time since the start of 2022.