FOREX-Dollar rebound holds as yields steady ahead of jobs data

Credit: REUTERS/MAXIM SHEMETOV

The dollar held gains on Wednesday after a quick recovery from an earlier fall as markets chose to focus on a suggestion from a top U.S. Federal Reserve official that the central bank may reduce support for the improving economy more quickly than widely thought.

By David Henry

NEW YORK, Aug 4 (Reuters) - The dollar held gains on Wednesday after a quick recovery from an earlier fall as markets chose to focus on a suggestion from a top U.S. Federal Reserve official that the central bank may reduce support for the improving economy more quickly than widely thought.

The bullish comments on the U.S. economy, by Fed Vice Chair Richard Clarida, triggered a rebound in U.S. Treasury yields and turned market attention away from the release two hours earlier of an unexpectedly weak private employment report that had driven the dollar down.

The dollar swung from being down 0.3% for the day to up 0.3%on the opposing clues on whether the United States will see strong economic growth and higher interest rates or a serious drag from the coronavirus pandemic.

The ADP National Employment Report was seen as possibly foreshadowing softness in July jobs data due on Friday. But there were doubts about its value as a predictor and another report showed U.S. service industry activity jumping to a record high in July.

The currency markets have been expecting Friday's non-farm payrolls report to be the next big catalyst for exchange rates, followed by comments expected at a symposium of central bankers at the end of this month in Jackson Hole, Wyoming.

In the afternoon in New York, the dollar index against major currencies =USD was up 0.2% to 92.246.

The Japanese yen, often seen as a competing safe haven, was a big beneficiary of the dollar's initial fall on the ADP report and gained to 108.77 per dollar, but couldn't hold its break below 109. The dollar was last trading at 109.45 yen, up 0.4%. JPY=EBS

The euro and British pound also swung against the greenback. The euro was last trading at $1.1840 EUR=EBS, off 0.2% for the day. Sterling was down 0.2% to $1.3889 GBP=D3.

The initial downdraft came when the ADP report showed U.S. private payrolls increased about half as much as economists had expected, likely constrained by shortages of workers and raw materials.

"It was a fairly big disappointment," said Mazen Issa, senior currency strategist at TD Securities.

The ADP report has a mixed record of predicting the government report, Issa said, but added, "the miss is substantial enough that the markets may be a little bit more nervous going into Friday's report."

Federal Reserve Chair Jerome Powell and other policy makers have recently emphasized that upcoming employment reports will be critical to the board's decisions about when and how to cut back on support for the economy.

Fed policy maker Robert Kaplan told Reuters on Wednesday that more "progress" in the July and August jobs reports would be reason to start pulling back on bond purchases "soon."

The dollar has lost value in recent weeks as declining yields made strategists question whether the U.S. economy will grow as much as they had expected in light of the spread of the highly contagious Delta variant of COVID-19.

Ether, the second-largest cryptocurrency, rose 7% to $2,690 ETH=BTSPahead of an upcoming change in the Ethereum blockchain network that will take some tokens out of circulation.

Bitcoin BTC=BTSProse 4% to $39,640.

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Currency bid prices at 3:14PM (1914 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Dollar index

=USD

92.2460

92.0360

+0.24%

2.517%

+92.3110

+91.8140

Euro/Dollar

EUR=EBS

$1.1840

$1.1865

-0.21%

-3.09%

+$1.1899

+$1.1833

Dollar/Yen

JPY=EBS

109.4500

109.0300

+0.39%

+5.94%

+109.6700

+108.7250

Euro/Yen

EURJPY=

129.58

129.35

+0.18%

+2.10%

+129.8100

+129.1500

Dollar/Swiss

CHF=EBS

0.9062

0.9041

+0.25%

+2.45%

+0.9076

+0.9019

Sterling/Dollar

GBP=D3

$1.3889

$1.3914

-0.18%

+1.67%

+$1.3957

+$1.3889

Dollar/Canadian

CAD=D3

1.2549

1.2535

+0.12%

-1.45%

+1.2562

+1.2516

Aussie/Dollar

AUD=D3

$0.7381

$0.7393

-0.14%

-4.02%

+$0.7426

+$0.7370

Euro/Swiss

EURCHF=

1.0728

1.0726

+0.02%

-0.73%

+1.0740

+1.0724

Euro/Sterling

EURGBP=

0.8522

0.8529

-0.08%

-4.64%

+0.8532

+0.8506

NZ Dollar/Dollar

NZD=D3

$0.7045

$0.7019

+0.41%

-1.86%

+$0.7088

+$0.7018

Dollar/Norway

NOK=D3

8.8365

8.8215

+0.15%

+2.89%

+8.8480

+8.7780

Euro/Norway

EURNOK=

10.4630

10.4650

-0.02%

-0.04%

+10.4778

+10.4180

Dollar/Sweden

SEK=

8.6058

8.5979

-0.15%

+4.99%

+8.6126

+8.5666

Euro/Sweden

EURSEK=

10.1894

10.2049

-0.15%

+1.12%

+10.2130

+10.1838

World FX rateshttps://tmsnrt.rs/2RBWI5E

(Reporting by David Henry in New York and Iain Withers in London; editing by Kirsten Donovan and Sonya Hepinstall)

((David.Henry@thomsonreuters.com; +1-332-219-1974; Reuters Messaging: david.henry.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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