U.S. Markets

U.S. dollar drifts higher; traders eye non-farm payrolls

3 minute read

A picture illustration of U.S. dollar, Swiss Franc, British pound and Euro bank notes, taken in Warsaw January 26, 2011. REUTERS/Kacper Pempel/File Photo

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  • Traders look to U.S. non-farm payrolls
  • Omicron fears still weighing on FX
  • Fed officials back Powell's accelerated taper move
  • U.S. initial jobless claims give dollar brief boost
  • <a href="https://tmsnrt.rs/2RBWI5E">Graphic: World FX rates</a>

NEW YORK, Dec 2 (Reuters) - The dollar edged higher on Thursday in choppy trading as risk appetite improved with higher U.S. stocks, although investors remained worried about the fast-spreading Omicron coronavirus variant and the speed at which the U.S. Federal Reserve will taper its asset purchases.

The U.S. currency's moves were limited though, as investors looked ahead to Friday's non-farm payrolls report for November.

"A really strong payrolls report as we're projecting could be another element to re-asserting the dollar," said Mazen Issa, senior FX strategist at TD Securities in New York.

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Wall Street economists have estimated the U.S. economy created 550,000 new jobs last month, a Reuters poll showed.

In afternoon trading, the dollar index, which tracks the greenback against six major currencies, rose 0.1% to 96.131 .

The index dropped last week after news of Omicron first emerged, although it remains close to a 16-month high of 96.938 hit last month.

On Thursday, the United States recorded its second case of the Omicron variant, but that has had muted impact on stocks and other risk assets.

"Anecdotal evidence seems to suggest that it may not be as severe as many people feared," said TD's Issa.

"If there's anything to take away from all of these is that the impact of the virus' successive waves tends to be less and less the longer it goes. Yes, it's still a risk, but vaccine makers are able to adjust to address it," he added.

The United States and Germany joined countries around the globe planning stricter COVID-19 restrictions on Thursday. read more

The dollar rose 0.4% versus the yen to 113.155 .

The greenback earlier gained after U.S. data showing initial claims for state unemployment benefits rose 28,000 to a seasonally adjusted 222,000 for the week ended Nov. 27, lower than the forecast of 240,000. read more

Sterling, meanwhile, rose 0.2% to $1.3298 , while the euro slipped 0.2% to $1.1294 .

Scotiabank, in a research note, highlighted the euro's allure as "a semi-haven currency." Since the Omicron story broke last week, the euro has gained 0.9% versus the dollar.

However, Scotia expects the euro to weaken toward the $1.10/11 zone given weak near-term economic and rates fundamentals, although virus uncertainty should keep it in a $1.12-$1.14 range for now.

Currency volatility trackers remain at multi-month highs, suggesting big moves could still be in store, analysts noted.

Traders are also awaiting clarity on how quickly the Fed will taper its asset purchases, as central banks around the world grapple with how to unwind stimulus amid soaring inflation.

Fed Chair Jerome Powell reiterated in testimony to Congress on Wednesday that he and fellow policymakers will consider swifter action at their Dec. 14-15 meeting. read more

Several Fed officials - Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin, and San Francisco Fed President Mary Daly - on Thursday echoed Powell's comments. read more


Currency bid prices at 3:09 PM (2009 GMT)

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Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Iain Withers in London; Editing by Emelia Sithole-Matarise, Nick Macfie, Andrea Ricci and Dan Grebler

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