By Amanda Cooper and Gertrude Chavez-Dreyfuss
LONDON/NEW YORK (Reuters) – The dollar gained against most of its peers on Thursday in thin trading, as investors consolidated positions and pondered how pivotal U.S. jobs data coming out on a stock trading holiday might impact Federal Reserve policy and unleash a potentially volatile market reaction.
The U.S. stock market is closed on Good Friday and some European countries are shut on Monday as well.
The closely-watched U.S. non-farm payrolls report on Friday, when many markets around the world are closed, will follow disappointing manufacturing and services sector data from the Institute for Supply Management (ISM) and private employment figures on Wednesday.
“The market is consolidating here and I don’t think there’s much participation given the upcoming holiday. I’m still bearish on the dollar,” said Marc Chandler, chief market strategist, at Bannockburn Global Forex in New York.
“People saw that the dollar’s rally through early March was based on one leg and that was Fed policy. The Fed was leaning toward higher for longer and then the bank stress hit and since then in the last couple of weeks, the economic data has disappointed,” he added.
Thursday’s U.S. initial jobless claims added fuel to the slowing-economy mantra. The data incorporated revisions to previous numbers after the government updated the model it uses to adjust the series for seasonal fluctuations.
Initial claims for state unemployment benefits dropped 18,000 to a seasonally-adjusted 228,000 for the week ended April 1. But data for the prior week was revised to show 48,000 more applications received than previously reported.
In addition, the number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 6,000 to 1.823 million during the week ending March 25.
“Today’s revisions brings claims more in line with what we would have expected to see given the anecdotal evidence of weakening conditions in the labor market,” wrote Tom Simons, U.S. economist, at Jefferies in New York in research note after the data.
While the slew of sluggish economic data has caused traders to scale back bets on how much longer U.S. rates would need to stay in restrictive territory, it has simultaneously reignited concerns about the risk of recession.
Economists polled by Reuters expect non-farm payrolls to have grown by 239,000 in March, following February’s 311,000 gain. The non-farm payrolls number has been far more prone to delivering upside surprises than misses in the last year or two.
For markets, this could make for a highly volatile session.
GRAPHIC – Surprise me
https://www.reuters.com/graphics/ECONOMY-SURPRISE/xmpjkjkorvr/chart.png
In late morning trading, the U.S. dollar index, which hit a two-month low this week, thanks in part to a drop in Treasury yields, was up 0.1% at 101.96.
The dour U.S. economic signs have strengthened the view that the Fed will reverse course on rate increases,
U.S. rate futures markets are currently pricing in a roughly even chance of the Fed leaving rates unchanged at its next meeting, with multiple rate cuts being priced by the end of the year.
The Japanese yen, which has also some support from safe haven bids, fell against the dollar, which rose 0.4% to 131.79 yen.
Meanwhile, the risk-sensitive Australian and New Zealand dollars dropped 0.9% and 1.1%, respectively.
Sterling slid 0.3% to $1.2429, while the euro was little changed at $1.0917.
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Currency bid prices at 10:38AM (1438 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 101.9100 101.8700 +0.06% -1.527% +102.1300 +101.8100
Euro/Dollar $1.0917 $1.0908 +0.09% +1.89% +$1.0920 +$1.0885
Dollar/Yen 131.7750 131.3300 +0.35% +0.52% +131.9000 +130.7850
Euro/Yen 143.82 143.11 +0.50% +2.51% +143.8900 +142.5600
Dollar/Swiss 0.9050 0.9066 -0.14% -2.09% +0.9074 +0.9037
Sterling/Dollar $1.2434 $1.2463 -0.22% +2.82% +$1.2487 +$1.2413
Dollar/Canadian 1.3480 1.3457 +0.17% -0.51% +1.3505 +1.3447
Aussie/Dollar $0.6662 $0.6722 -0.91% -2.28% +$0.6725 +$0.6654
Euro/Swiss 0.9878 0.9888 -0.10% -0.17% +0.9890 +0.9852
Euro/Sterling 0.8779 0.8749 +0.34% -0.74% +0.8783 +0.8740
NZ $0.6248 $0.6317 -1.09% -1.60% +$0.6324 +$0.6240
Dollar/Dollar
Dollar/Norway 10.4350 10.4500 -0.08% +6.40% +10.4810 +10.4150
Euro/Norway 11.3882 11.3710 +0.15% +8.52% +11.4210 +11.3588
Dollar/Sweden 10.4315 10.3912 +0.34% +0.23% +10.4712 +10.3668
Euro/Sweden 11.3836 11.3449 +0.34% +2.10% +11.4055 +11.3450
(Reporting by Amanda Cooper in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Rocky Swift in Tokyo and Rae Wee in Singapore; Editing by Jamie Freed, Christina Fincher, Chizu Nomiyama and Marguerita Choy)
