U.S. Dollar is Struggling to Overcome Challenges

The U.S. currency was pinned near recent lows on Wednesday as investors awaited U.S. jobs data for a guide regarding the interest rate outlook. Meanwhile, a decline in unemployment in New Zealand lifted the local dollar in anticipation that rate hikes could begin there within weeks.

Central bankers from Wellington to Washington are monitoring labor markets as a job recovery is a precondition for raising rates. A decline in the unemployment rate sent the New Zealand dollar 0.6% higher to a one-month high top of $0.7066. In the last quarter, the country’s unemployment rate fell to 4%.

Opposite concerns seemed to weigh on the world’s reserve currency, as doubts over the economic recovery creep in to bond and currency markets, with partial jobs data due in several hours and non-farm payroll figures due on Friday. Both of them have the ability to affect the U.S. dollar.

Economists expect ADP payrolls data to show that the U.S. economy added 695,000 jobs in July.

It could take several months of that kind of growth to reduce unemployment sufficiently for the Fed to take note. A speech from Federal Reserve Vice Chair Richard Clarida will be closely watched for any information on policymakers’ thinking.

Dollar, euro, franc, and emerging markets

The dollar declined marginally on the euro during the trading session in Asia to touch $1.1875 against while stubbornly low U.S. yields gave support to higher-paying Asian currencies.

The South Korean won strengthened its position for a third straight session. It gained 0.5% on Wednesday. The Singapore dollar reached its highest point in a month and the Indonesian rupiah touched a seven-week peak.

A backdrop of worries regarding a highly contagious Delta variant helped to boost safe-haven currencies such as yen and franc.

After declining since the start of 2021, the Japanese yen changed direction in July and gained about 2.5% against the dollar in a month. The yen reached its highest level since late May on Tuesday and was stable at 109.02 on Wednesday.

The Swiss franc sat by a seven-week high of 0.90235 per dollar that it reached one day earlier. The British pound was steady ahead of a Thursday Bank of England meeting. The pound has the opportunity to reach the $1.40 mark, but its fate depends on policymakers’ decisions.

In emerging markets, traders are waiting for central bank meetings in Thailand as well as Brazil, with opposite expectations.