Dollar holds tight ahead of key U.S. jobs data

The dollar steadied against major currencies on Friday as traders awaited key U.S. jobs data that will shed light on the strength of economic recovery from the coronavirus outbreak.

The euro was in focus before data on German industrial orders, which could provide more clues about the health of the euro-zone economy.

The greenback has managed to halt its recent slide, but analysts warn sentiment remains weak due to concern about the strength of U.S. economic growth and speculation that the Federal Reserve will keep rates low for a very long time.

“The dollar has rebounded against the euro and could continue to rise a little further,’’ said Junichi Ishikawa, Senior Foreign Exchange Strategist at IG Securities in Tokyo.

“However, my main scenario is for the dollar to fall, for stocks to rise and for yields to fall because the Fed is expected to stick with low interest rates.’’

Against the euro EUR=D3, the dollar stood at $1.1849 on Friday, extending a pullback from a two-year low hit on Tuesday.

The British pound GBP=D3 bought $1.3281, retreating from its highest level in almost a year due to a lack of progress in trade negotiations between Britain and the European Union.

The greenback was quoted at 0.9099 Swiss franc CHF=EBS.

Against the yen JPY=D3, the dollar traded at 106.18.

Data due later on Friday is expected to show U.S. non-farm payrolls grew by 1.4 million in August, which would be slower than the 1.763 million jobs created in the previous month.

There are growing signs the labour market recovery from the depths of the pandemic is faltering, with financial support from the government virtually depleted.

The U.S. central bank last week overhauled its policy framework to focus more on addressing shortfalls in employment and less on inflation, which would allow it to keep rates lower for longer periods, which is a negative for the dollar.

Chicago Fed President, Charles Evans, said on Thursday the bank could promise to keep interest rates pinned near zero until inflation reaches 2.5 per cent, well above current low levels and modestly above the inflation target of two per cent.

The dollar index =USD against a basket of six major currencies was little changed on Friday at 92.774.

The dollar’s downtrend will continue for at least another three months due to the outlook for the Fed’s monetary policy, a Reuters’ poll of analysts showed on Friday.

The euro could find support if economic data help eases concerns about the outlook.

A report due later on Friday is forecast to show orders for German-made goods rose five per cent in July, which would be slower than a 27.9 per cent surge in the previous month but still suggest that Europe’s largest economy is recovering from coronavirus lockdowns.

The Antipodean currencies initially fell slightly, tracking the broader loss of investor confidence as a sell-off in U.S. tech shares hit Asian stocks and a closely-watched measure of market volatility hit a 10-week high.

However, the looming U.S. jobs data brought investors back to a more measured posture.

The Australian dollar AUD=D3 steadied at $0.7272, supported after local retail sales accelerated in July.

Across the Tasman Sea, the New Zealand dollar NZD=D3 erased losses to trade to $0.6706.