Friday, September 06 12:14:53
The dollar rose to a seven-week high against the euro today on expectations of an upbeat U.S. jobs report that could pave the way for the Federal Reserve to begin unwinding monetary stimulus this month.
In contrast, the euro was struggling not just against the dollar, but against the yen and the British pound after the European Central Bank head said the bank was ready to cut official rates and inject more funds into the system to keep conditions accommodative.
The two-year U.S. Treasury yield was trading near its highest since May 2011, at 0.5100 percent, and the gap over similar German bonds widened to its highest since mid-July.
The 10-year benchmark yield, which has a strong correlation with the dollar index, touched 3 percent on Thursday, its highest in more than two years.
U.S. non-farm payrolls data for August are due at 1230 GMT and the report is the last one before the Fed meets later this month to decide on stimulus withdrawal. Employers are expected to add 180,000 jobs in August, and a higher figure would cement the case for tapering this month.
The euro fell to $1.3106, a seven-week low with traders citing a reported option barrier at $1.3100. The euro was also hurt by below-forecast German industrial output data . The dollar index was at 82.581, not far from a recent seven-week peak of 82.671.
"A strong U.S. jobs report, say 200,000 or more, in our view will drive U.S. yields higher and support the dollar," said Bernd Berg, global currency analyst at Credit Suisse. "While it will head higher against the euro, we think the impact will be felt more in the dollar/yen."
He expected dollar to rise past 100 yen if the data beats expectations. Rising U.S. yields would be expected to lure more Japanese investors into Treasuries, he added. (Reuters)