Dollar on back foot ahead of jobs report; yen on track for hefty weekly gains By Investing.com

Investing.com – The US dollar fell slightly on Friday, as activity eased ahead of the widely watched monthly US jobs report, and the Japanese yen braced for its next week in more than a year.

At 04:25 EDT (08:25 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, fell 0.1% to 105.110, on track for its worst week in nearly two months.

The dollar declines ahead of payrolls

The dollar has been on the decline for most of this week, after the Federal Reserve chairman largely ruled out raising interest rates, suggesting the US central bank is still leaning toward eventual interest rate cuts, even if they may take longer than previously. expected at first.

“The post-FOMC bias was markedly bearish on the dollar, and despite today's US payroll risk-on event, markets continued to press US dollar long positions yesterday and overnight,” analysts at ING said in a note.

Attention now turns to the closely watched US monthly employment report.

It likely rose by 238,000 jobs last month after rising by 303,000 in March, while it is expected to remain steady below 4% for the 27th straight month.

Powell explained the importance of upcoming economic data regarding policy decisions, after the US central bank left interest rates unchanged on Wednesday.

Financial markets continue to expect the central bank to begin its monetary easing cycle in September, but strong numbers could see that window start to close.

“Overall, our call for 210,000 jobs means we do not expect today's data to dampen the dollar's downward momentum, as markets may fully price in a cut in September and keep short-term USD interest rates limited,” ING added.

Eurozone manufacturing remains weak

In Europe, trading rose 0.2% to 1.0743, supported by recent dollar weakness.

However, recent economic news out of the Eurozone has not been helpful, with a 0.3% month-on-month decline in March, according to data released earlier on Friday.

The euro zone's manufacturing sector remained in contraction territory in April, according to a final release on Thursday, while the VDMA said German manufacturers deepened the decline in their order books in March.

The European Central Bank has signaled a rate cut in June, but there is still a great deal of uncertainty about what will happen to monetary policy next.

It traded 0.2% higher at 1.2555 after the number was released.

This showed an increase to 55.9 in April, from 53.1 the previous month, suggesting that the UK's dominant services industry remains in a healthy state, which could provide the Bank of England with room to delay interest rate cuts.

The yen is on track for huge weekly gains

In Asia, it fell by 0.2% to 153.26, with the pair on track to report a weekly loss of more than 3%, the largest since December 2022.

The Japanese authorities were linked to intervention to support its currency this week amounting to about 9.16 trillion yen ($59.8 billion), as data from the Bank of Japan indicate.

These forays into the currency market tend to occur during periods of weak liquidity, with the country going off on holiday on Monday while the second attempt occurred late on Wednesday after Wall Street closed.

“The second round of Japanese yen intervention in one week, deployed after a less hawkish-than-expected FOMC decision on Wednesday, sent markets a message that the Finance Ministry is less tolerant of a depreciation of the yen after the intervention this time,” ING said. . .

Broader Asian currencies rose slightly, benefiting from the dollar's overnight decline.

The pair rose 0.3% to 0.6579, as markets brace for possible hawkish signals from next week. Hotter Australian inflation readings saw markets expected to largely beat expectations of any interest rate cuts by the Reserve Bank of Australia in 2024, giving the Australian dollar some strength.