Dollar Fell Against its Main Rivals Ahead of Jobs Report

The U.S. dollar declined to its lowest point in almost a month against main rivals on Friday, ahead of crucial U.S. jobs report that could spur the central bank to an earlier tapering of stimulus.

The dollar index, which measures the U.S. currency against six peers, stood at 92.227, after earlier touching 92.151. 

The single currency was mostly flat at $1.1876, after hitting the highest since August 4 at $1.1884. The regional inflation and hawkish rhetoric from European Central Bank officials supported the euro.

Meantime, the Federal Reserve made a labor market recovery a prerequisite for reducing pandemic-era asset purchases. 

The greenback had been strengthening for the most part of August on the view that a taper could be imminent, even as Covid-19 cases spiked in the U.S. Moroever, the pandemic gave the dollar an additional boost because of its role as a safe haven.

The dollar index, nonetheless, retreated after hitting a 9-½-month high of 93.734 on August 20. It retreated as Fed officials began suggesting the virus’ spread could delay policy tightening.

Dollar and various factors

At the Federal Reserve’s Jackson Hole symposium Fed Chair Jerome Powell’s speech was quite interesting. He stated that a taper was still possible in 2021. But the central bank was not in a hurry to subsequently raise interest rates, sending the dollar further. 

Analysts expect that monthly non-farm payrolls, due later on Friday to rise by 750,000. They also expect the unemployment rate to decline from 5.4% to 5.2%. Nonetheless, estimates range widely, from as little as 375,000 to more than a million.

The situation ahead of crucial U.S. jobs reports is quite confusing, to say the least. Overnight, data showed layoffs fell to their lowest in more than 24 years. But the ADP National Employment Report two days ago was much weaker than economists expected. 

Commonwealth Bank of Australia forecasts the U.S. added 800,000 jobs in August. The bank says it would be enough to spur the Federal Reserve to taper.

The Australian dollar gained 0.3% to $0.7426 after earlier touching a one-month high of $0.7430. 

The New Zealand dollar rose 0.18% to $0.7125 after rising to the highest level since June 16 at $0.7130.

The U.S. currency advanced 0.1% to 110.03 yen, holding near the center of its trading range since early July.