April 4, 2014 / 11:11 AM / 6 years ago

FOREX-Dollar index at five-week high before U.S. jobs data

(Adds fresh quote, details)

* Biggest non-farm payrolls rise in four months forecast

* Euro under pressure, close to one-month low vs dollar

* ECB committed to also using unconventional tools-Draghi

By Anirban Nag

LONDON, April 4 (Reuters) - The dollar was trading at a five-week high against a basket of currencies on Friday, as investors positioned themselves for robust U.S. non-farm payrolls data later in the day.

Analysts polled by Reuters expect 200,000 jobs were created in March - the highest in four months - after rising by 175,000 in February. They expect the unemployment rate fell a tenth of a percentage point to 6.6 percent.

The dollar index rose to 80.539, its highest level since Feb. 27, in early London trade. The currency was bolstered by a recent rise in rate-sensitive U.S. short-dated yields. The two-year Treasury yield was near a seven-month high.

“We are pretty positive it will be a good U.S. jobs number, partly because the impact from the harsh winter will wane and also because all the forward-looking indicators have been pointing to a pickup in the labour market,” said Manuel Oliveri, FX strategist at Credit Agricole.

“What this means is we will have U.S. yields pushing higher and this will help dollar/yen grind higher. Better risk sentiment, given U.S. stocks are also rising on better growth prospects, will also weigh on the yen.”

Against the yen, the dollar was steady at 103.91 yen, after rising as high as 104.12 yen on Thursday, its first time above 104 since Jan. 23. The yen is usually sought as a safe haven during times of economic uncertainty.

“We now believe that dollar/yen will return to its role of being the favoured way to play U.S. data strength,” Morgan Stanley said in a note. “We note that dollar/yen’s sensitivity to global risk indicators has been increasing once again.”

Morgan Stanley expects dollar to break higher to around 106.50/107 yen in the short term.


A robust jobs market will bolster expectations the Federal Reserve will start to raise rates sometime next year. But growing risks that the European Central Bank will resort to quantitative easing pinned the euro down.

The euro hit a one-month low against the dollar, after ECB President Mario Draghi said on Thursday the Governing Council was unanimous in its commitment to also using “unconventional instruments within its mandate in order to cope effectively with risks of a too-prolonged period of low inflation.”

Unconventional instruments include quantitative easing - essentially, printing of money to buy assets. Some euro zone central bankers considered such measures highly undesirable until now.

The euro fell to $1.36955 in European trade, extending losses from Thursday. Reported option expiries at $1.37 are likely to keep the currency around that levels for now, traders said.

Against the yen, the euro shed 0.1 percent to trade at 142.42, staying away from a four-week peak of 143.48 set on Wednesday.

“Draghi was cautious and raised the prospects of inflation undershooting,” said Credit Agricole’s Oliveri. “Investors will tend to stay away from the euro, as a higher currency will spur expectations of more ECB action.”

The growth-sensitive Australian dollar rose about 0.1 percent to $0.9245, moving back toward its four-month peak of $0.9310 touched earlier this week. (Editing by Larry King)

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