Dollar soft, Aussie firm as sentiment recovers before U.S. jobs data

© Reuters. FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo

By Kevin Buckland

TOKYO (Reuters) - The safe-haven dollar hovered below a one-year high to major peers on Friday amid improved risk sentiment, while traders awaited clues on the pace of Federal Reserve policy normalization from a closely watched monthly payrolls reports.

The risk-sensitive Australian dollar held near the three-week high hit overnight, when it surged 0.55% against the greenback.

Global equities rallied and bond yields climbed after U.S. Senate leaders moved to avert a U.S. debt default, while a global easing in energy prices tempered simmering stagflation fears.

"The improvement in risk appetite favours pro-growth currencies, with safe-haven pairs the underperformers," Rodrigo Catril, senior FX strategist at National Australia Bank (OTC:NABZY) in Sydney, wrote in a client note.

The Aussie has made "a decent go at breaking higher," but the test will be whether it can stay about $0.7315 following several failed attempts this year, Catril said.

Australia's currency was almost flat at $0.73105 from Thursday, when it rallied as high as $0.7324 for the first time since Sept. 16.

The U.S. Dollar Currency Index, which measures the greenback against a basket of six peers, was little changed at 94.202 after trading in a tight range on Thursday, staying within sight of last week's high of 94.504, a level not seen since late September 2020.

The dollar edged up 0.06% to 111.69 yen, drifting toward the upper end of the trading range of the past week and a half.

The euro consolidated around $1.1555, after dipping on Wednesday to a 14-month low of $1.1529.

The Federal Reserve has said it is likely to begin reducing its monthly bond purchases as soon as November and follow up with interest rate increases potentially next year, as the U.S. central bank's turn from pandemic crisis policies gains momentum.

Friday's non-farm payrolls data is expected to show continued improvement in the labour market, with a forecast for 500,000 jobs added in September, a Reuters poll showed.

Meanwhile, sterling held a 0.26% gain from overnight to trade at $1.3617.

Comments from new Bank of England Chief Economist Huw Pill that inflation pressures were proving stickier than initially thought reinforced expectations for a rate hike by February, and perhaps even this year.

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Currency bid prices at 0037 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.1556 $1.1554 +0.01% -5.43% +1.1560 +1.1551

Dollar/Yen

111.7200 111.6150 +0.00% +8.06% +111.7200 +0.0000

Euro/Yen

129.10 128.95 +0.12% +1.72% +129.1100 +128.9500

Dollar/Swiss

0.9290 0.9290 -0.01% +5.00% +0.9291 +0.9288

Sterling/Dollar

1.3613 1.3615 +0.01% -0.33% +1.3622 +1.3617

Dollar/Canadian

1.2555 1.2554 +0.01% -1.41% +1.2562 +1.2547

Aussie/Dollar

0.7312 0.7313 -0.01% -4.94% +0.7319 +0.7307

NZ

Dollar/Dollar 0.6931 0.6931 +0.01% -3.47% +0.6937 +0.6930

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ