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FOREX-Dollar rises on private sector jobs data, Fed minutes eyed
January 8, 2014 / 4:46 PM / 4 years ago

FOREX-Dollar rises on private sector jobs data, Fed minutes eyed

* U.S. dollar helped by strong private sector jobs data

* Fed minutes later in session, ECB meeting on Thursday are factors

* Focus on U.S. jobs data on Friday

* Swedish crown and Canadian dollar drop

By Julie Haviv

NEW YORK, Jan 8 (Reuters) - The dollar rose against a basket of currencies on Wednesday as better-than-expected U.S. private sector jobs growth data suggested the recovery in the world’s largest economy gained traction at the end of last year.

The pace at which the U.S. Federal Reserve pares its monthly purchases of Treasuries and mortgage-backed securities this year is widely seen as hinging on the state of the U.S. labor market, with signs of hiring strength favoring the greenback.

Minutes from the Fed’s December meeting, at which the U.S. central bank announced its decision to begin trimming its stimulative bond buying, will be released at 2 p.m. ET (1900 GMT).

Along with clues on the Fed’s purchases, the minutes will also be scrutinized for signs of how long the central bank will keep interest rates at record lows.

U.S. private employers added 238,000 jobs in December, more than expected and the best reading in 13 months, a report by a payrolls processor showed on Wednesday. ADP’s National Employment Report also revised November’s job gains higher.

“It was without a doubt good report,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.

“The ADP report is doing a much better job at predicting the Labor Department’s number for nonfarm payrolls, so this data will undoubtedly change forecasts for Friday’s release,” he said.

The ADP report comes two days ahead of the government’s nonfarm payroll report, a measure of the labor market that is more comprehensive and includes both public and private sector employment.

Analysts are looking for a 196,000 jobs to have been added in December, and a rise in private payrolls of 195,000. Friday’s report may provide more clues as to how quickly the U.S Federal Reserve will cut back on its bond-buying program this year.

The dollar last traded 0.2 percent higher at 104.84 yen, down from an earlier high of 105.12 yen, but above Monday’s two-week low of 103.88. Last week the dollar reached a five-year high of 105.44 yen.

The dollar index, which tracks the greenback against a basket of six major currencies, reached a six-week high of 81.048 and was last up 0.1 percent on the day at 80.928.

The dollar also firmed against the euro, with the single currency last trading 0.2 percent lower at $1.3594. On Thursday, the euro will likely be swayed by the European Central Bank’s monthly policy meeting.

“While the ECB is likely to raise concern over what has been a rather stagnant inflation situation, a lack of change in policy tomorrow alongside little guidance for future accommodation could prove supportive for the euro,” said Christopher Vecchio, currency analyst at DailyFX in New York.

“Only a near-explicit hint of more easing over the coming meetings will have a lasting, negative impact,” he said.

Action in European trade centered around the Swedish crown, hurt by minutes from the central bank’s last meeting that were read as leaving room for more cuts in interest rates.

The Swedish central bank’s emphasis on macroprudential measures to deal with the effects of household debt was read as leaving the door open to another cut in interest rates. Minutes from the bank’s last meeting also showed that two members supported a bigger cut in rates last month.

The dollar last traded 0.8 percent higher at 6.5634 crown. The euro was 0.6 percent higher at 8.9194 crown.

The Canadian dollar slid after a survey of Canada purchasing managers came in lower than expected and the trade deficit proved bigger than forecast on Tuesday.

That lifted the U.S. dollar to C$1.0828, its highest since May 2010. It was last up 0.5 percent at C$1.0814, according to Reuters data.

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