TOKYO (Armfalcon.com) – The dollar edged higher in Asia on Thursday afternoon but stood near a two-month low as traders weighed how the key US jobs data due out on the stock trading holiday will impact Federal Reserve policy, after a slew of data pointed to to economic cooling.
The closely watched US nonfarm payrolls data (NFP) report on Friday (7/4/2023), as many global markets are closed, will follow disappointing services sector data from the Institute for Supply Management (ISM) and private employment figures on Wednesday. (5/4/2023), as well as a decline in March US manufacturing activity at the start of the week.
While a slew of sluggish economic data has led traders to reduce bets on how much longer US interest rates need to stay in restrictive territory, it has simultaneously reignited recession fears.
That has curtailed risk appetite and sent traders looking for some safe haven assets.
The US dollar index was up 0.14 percent at 102.01, after sliding to a two-month trough of 101.40 in the previous session.
The Japanese yen also found some support from the bids safe haven and last about 0.1 percent higher at 131.20 per dollar.
Meanwhile, the risk-sensitive Australian and New Zealand dollars fell 0.39 percent and 0.38 percent, respectively.
“Weak economic data continue to weigh on investor sentiment, triggering a bid to flee to safety,” analysts at Westpac said in a note to clients.
Risk-averse sentiment sent US stocks lower Wednesday while government bonds rose, which saw the 10-year yield fall to its lowest level since September. Yields fall when bond prices rise.
The 10-year government bond yield was last at 3.2958 percent, while the two-year yield, which usually moves in line with interest rate expectations, was 3.7605 percent.
“The key for forex is the interaction between what the US economic numbers provide as far as interest rates and sentiment about Fed policy,” said Ray Attrill, head of FX strategy at National Australia Bank.
In other currency action, sterling fell 0.2 percent to $1.2437 while the euro slipped 0.14 percent to $1.0891.
Dismal economic signs have strengthened views that the Fed will reverse the course of raising interest rates, with traders hoping for more insights when St. Louis, James Bullard spoke on Thursday.
Cleveland Fed President Loretta Mester, a hawkish Famously, said in an interview with Bloomberg TV on Wednesday (5/4/2023) that it is too early to know whether the Fed will need to raise its benchmark interest rate at its next policy meeting in May.
The US interest rate futures market is currently pricing in more or less equal chances for the Fed to leave rates unchanged at its next meeting, with rate cuts set for early July and into the end of the year.
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Translator: Apep Suhendar
Editor: Faisal Yunianto
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