LONDON: The dollar trod water against the yen and euro on Friday as investors were wary ahead of the U.S. non-farm payrolls report, which could influence chances of the Federal Reserve raising interest rates before year-end.
Economists expect U.S. nonfarm payrolls data, due later in the global day, to show that employers added 203,000 jobs in September, according to a Reuters poll. ECONUS
A figure in line or better than forecast would enhance prospects of the Fed tightening monetary policy this year or early in 2016. The other focal point is whether U.S. wages rose enough to offset disinflationary pressures.
Despite weakness in China, the U.S. economy and labor market have stood on more solid ground, keeping alive prospects of the Fed raising rates this year after it opted not to do so in September.
The dollar was steady at 120.02 yen JPY=, confined to a tight 120.60-119.245 range so far this week. The euro was flat at $1.1185 EUR=, having drifted down from this week’s peak of $1.1282 struck on Tuesday. The common currency was poised to lose a modest 0.2 percent this week.
“Fed Chair Yellen has already mentioned that labor conditions are improving and hinted that developments overseas, notably in China, and prices were chief concerns,” said Shinichiro Kadota, chief Japan FX strategist at Barclays in Tokyo.
“A very bullish report would of course have a big impact. But the Fed may not make its rates decision on employment data alone,” he said.
Some analysts saw commodity currencies showing a potentially bigger response to the U.S. jobs data than the majors, which have been trapped in narrow range all week.
“Currencies like the Australian, New Zealand and Canadian dollars could see bigger swings against the dollar. ‘China risk’ has already put these currencies on the defensive, and they would look even more vulnerable if the employment data improve prospects of a U.S. rate hike,” said Junichi Ishikawa, a market strategist at IG Securities in Tokyo.
