Hawkish comments from Federal Reserve officials also supported the greenback, after Minneapolis Fed President Neel Kashkari said that sticky inflation could see the central bank not cut interest rates at all in 2024.
His comments, which came after a string of similar signals from other Fed officials, sparked steep losses on Wall Street and kept traders largely wary of risk-driven assets.
The dollar index and dollar index futures rose 0.2% each in Asian trade on Friday, recovering from steep losses earlier in the week as anticipation of nonfarm payrolls data saw traders turn back towards the greenback.
Inflation and labor market strength are the Fed’s two biggest considerations for cutting interest rates this year. But inflation has turned sticky in recent months, while payrolls data has also consistently topped market expectations.
Beyond the payrolls data, U.S. consumer price index inflation data is also on tap next week, and is likely to provide more cues on interest rates.
The Japanese yen firmed on Friday, with the USDJPY pair hitting a two-week low amid persistent concerns over government intervention in currency markets.
Several top Japanese officials warned that sustained weakness in the yen could see the government intervene in currency markets- an event that is bound to spark strong near-term gains in the yen.
The USDJPY pair had risen to its highest level in 34 years last week, amid a largely dovish outlook for the Bank of Japan despite its first rate hike in 17 years.
But recent comments from BOJ officials also showed that they expected to further tighten monetary policy this year amid increasing inflation.
Broader Asian currencies moved in a flat-to-low range, as sentiment remained on edge before the U.S. payrolls print.
The Australian dollar’s AUDUSD pair sank 0.3% after data showed a bigger-than-expected decline in the country’s trade balance in February. The drop was driven chiefly by shrinking iron ore exports to China.
Chinese markets were closed for the day. The yuan’s offshore pair- USDCNH– rose slightly and remained well above the 7.2 level.
The South Korean won weakened, with the USDKRW pair rising 0.2%, while the Singapore dollar’s USDSGD pair also rose 0.1%.
The Indian rupee’s USDINR pair was flat and close to record highs ahead of a Reserve Bank of India meeting later in the day. The RBI is widely expected to keep policy repo rates at 6.5%.
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