Dollar Edges Lower; Employment Data Seen Key This Week

By Peter Nurse

AiVIF.com - The dollar edged lower Wednesday, remaining near recent lows ahead of the release of key U.S. employment data which could guide monetary policy thinking at the Federal Reserve.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 91.990, just above last week’s low of 91.775, the weakest since June 28.

USD/JPY rose 0.1% to 109.10, GBP/USD gained 0.1% to 1.3931, EUR/USD traded 0.1% higher at 1.1871, and the risk-sensitive AUD/USD rose 0.1% to 0.7404.

The dollar has struggled to make any headway since Federal Reserve Chairman Jerome Powell indicated last week that interest rate increases were still in the distance, stating that more progress was still needed, particularly in the labor market.

With improvements in the employment numbers seen as a precondition for raising rates, traders will be watching closely the release at the ADP payrolls report, due at 8:15 AM ET (1215 GMT), for guidance.

Analysts are looking for 695,000 private sector jobs to have been added last month, marginally better than the previous month, ahead of Thursday’s initial jobless claims and then Friday's key nonfarm payrolls.

A U.S. services survey will also be watched for a guide of the state of the economic recovery, as well as a speech from Federal Reserve Vice Chair Richard Clarida.

Elsewhere, NZD/USD rose 0.6% to 0.7055 after New Zealand’s unemployment rate fell more than forecast in the second quarter, increasing the likelihood of interest rate hikes in the near future.

The jobless rate fell to 4% from a revised 4.6% in the first quarter. This, adding to the annual inflation rate surging to 3.3% in the second quarter, suggests the country’s central bank could start to raise interest rates as soon as this month.

USD/BRL rose marginally to 5.1975 ahead of the latest policy-setting meeting of Brazil’s central bank. In June, the central bank lifted its benchmark Selic interest rate by 75 basis points to 4.25%, its third consecutive hike, in order to fight inflation, which was running substantially above target. Analysts expect a full one percentage point hike in the Selic this week.