LONDON (Reuters) -The dollar steadied on Friday, as investors awaited the U.S. jobs report, which could confirm the economy remains robust ahead of the Federal Reserve’s monetary policy meeting and a close-call U.S. presidential election next week.
October witnessed the dollar’s best monthly performance in more than two years, boosted by investors lowering their expectations for aggressive rate cuts from the Federal Reserve.
U.S. nonfarm payrolls data closes out the week, with economists polled by Reuters estimating 113,000 jobs were added in October, although analysts say recent hurricanes could affect the number.
Headline figures could miss estimates as a result, although a sustained market reaction should be limited, said Sean Callow, senior FX analyst at InTouch Capital Markets.
Analysts said the unemployment rate, which they expect to be 4.1%, will likely give a better read on the labour market’s overall health.
“So long as it remains below 4.3%, pricing for the Fed funds rate shouldn’t change much from (a 25 basis point cut) next week and likely another 25bp in Dec,” said Callow.
The dollar index, which measures the U.S. currency against six others, was up 0.2% at 104.08. It rose 3.1% last month, the most since September 2022 and looks set to remain firm for now.
“I see the dollar supported over the coming weeks, even though we’ve got a rate cut next week. But that’s priced in, so it would take a serious deterioration in economic data to see expectations of a December rate cut get fully priced in and the U.S. dollar fall lower,” City Index strategist Fiona Cincotta said.
YEN SOFTENS
The yen gave up some of Thursday’s gains, sliding 0.4% to 152.65, ahead of a three-day weekend in Japan and of a series of big risk events.
Less dovish comments from Bank of Japan Governor Kazuo Ueda following the central bank’s decision to stand pat on Thursday had the currency off a three-month low of 152.885 hit earlier this week.
“We think the chances of a Dec. rate hike have somewhat increased after Gov. Ueda’s press conference,” Morgan Stanley MUFG economists Takeshi Yamaguchi and Masayuki Inui wrote in a report on Thursday.
Their base case remains for the BOJ to raise rates again in January to 0.5.
The Fed announces its policy decision two days after the U.S. presidential election on Tuesday.
Republican candidate Donald Trump and Democratic Vice President Kamala Harris remain neck and neck in several polls, but some investors have been putting on trades betting Trump will win, lifting the dollar and U.S. Treasury yields.
Trump’s pledges to implement tax cuts, loosen financial regulations and raise tariffs are seen as inflationary and could slow the Fed in its policy easing path.
Elsewhere, China’s manufacturing activity returned to growth in October as an expansion in orders led to a pickup in production growth, a private sector survey showed on Friday.
The offshore yuan traded down about 0.15% at 7.1316 per dollar, while the onshore yuan was 0.1% weaker at 7.252.
The euro traded shy of a two-week high against the dollar, having gained this week after data showed euro zone inflation accelerated more than expected in October and the German economy posted signs of growth. It was last down 0.17% at $1.0864.
Sterling was steady at $1.2907, but was set for a fifth straight week of losses against the dollar.
This would be the longest such stretch since late 2018, following the release of the UK government’s first budget on Wednesday that raised concern about the impact of high taxes, high spending and high borrowing on growth and inflation.
In cryptocurrencies, bitcoin, the world’s largest cryptocurrency by market cap, was down 0.76% on the day at $69,397, having gained nearly 10% in October.
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