U.S. Dollar Once More Demonstrated its Strength on June 4

The U.S. dollar settled at multi-week highs on June 4, after notching up its biggest gains in about a month following robust jobs data. The U.S. jobs data threw investors’ focus on the strength of the U.S. recovery as well as the chance of policy tightening.

The next test comes later on Friday, when U.S. non-farm payrolls data is published. Interestingly, private payrolls data delivered a big beat with an increase of 978,000, against forecasts of 650,000, which sent the U.S. currency rallying. The dollar rose 0.6% against the euro on Thursday and drifted another 0.1% higher through the Asia session to a fresh three-week high of $1.2110 per euro.

The greenback sat by a two-month top versus the Japanese yen at 110.32 yen per dollar. The dollar hung to Thursday’s gains of more than 1% against the Australian and New Zealand dollars. The Aussie was licking wounds at $0.7659, after dropping to its lowest point since mid-April on Thursday. The kiwi stood at $0.7151 after falling to its cheapest since early May on Thursday.

Yuan also softened past 6.4 per dollar, while other moves were very slight as markets are waiting for the payrolls figures, with options trade showing it is expected to cause volatility.

The British pound was steady at $1.4091 after declining through its 20-day moving average as the dollar climbed.

Dollar and jobs data

The dollar index, which measures the greenback against the basket of six main currencies, advanced 0.1% to a three-week high of 90.596 on Friday.

When it comes to jobs data, a million or more might see the Aussie fall by another 1%. The euro could also suffer losses. Between 250,000-500,000 new jobs and people will potentially see dollar/yen decline 0.6% to 0.8%.

At issue is whether the data points to the sort of hiring that could soften pandemic job losses, lift wages and weigh on the dollar- or whether things feel like they are overheating.

Overnight implied dollar/yen volatility shot up to a month high of 8% on June 3. The euro/dollar suggested volatility reached its highest point since mid-March.

Cryptocurrencies suffered losses from a string of Elon Musk’s tweets. Nonetheless, they are mowing toward solid weekly gains. Bitcoin, which is the largest cryptocurrency in the world, was last off nearly 6% at a little over $37,000.