Dollar falters ahead of payrolls data; Australian dollar strengthens in early trade

4 Aug 2023 , 10:11 AM

On Friday, the dollar retreated from a four-week high versus significant rivals as investors awaited a crucial employment report that may have an impact on the direction of U.S. interest rates.

After recouping immediate losses caused by the Bank of England’s decision to scale back its rate hike on Thursday, the pound moved marginally higher.

As traders attempted to determine the Bank of Japan’s tolerance for higher yields in the wake of last week’s unexpected policy change, the yen remained close to the middle of its trading range this week.

In the meantime, the risk-averse Australian dollar gained strength as Chinese markets and U.S. equity futures recovered.

Early in Asia, the U.S. dollar index, which compares the dollar to a basket of six rival currencies, decreased 0.07% to 102.38. At one point on Thursday, it reached 102.84, the highest level since July 7, but it eventually lost momentum as the monthly nonfarm payrolls report loomed on Friday.

However, the long-term Treasury yields increased overnight to an almost nine-month high of 4.198%, helping the dollar inch up to 142.64 yen.

Despite a warning that rates were likely to continue high for some time, sterling increased 0.17% to $1.27305 on Friday after falling as low as $1.2620 on Thursday for the first time since June 30 following the BoE decision.

Inching up 0.06% to $1.09585, the euro.

As inflation keeps declining and economy slows, the European Central Bank last week hinted it would take a break at its next session in September.

The Australian dollar, meanwhile, increased 0.5% to $0.65815, maintaining its comeback from its two-month bottom of $06514 set on Thursday.

This was true even though the Reserve Bank of Australia said in its quarterly monetary policy statement that inflation is improving, lowering the likelihood of further rate increases.

The risk-sensitive currency, on the other hand, concentrated on the encouraging signals from the equity markets, with Hong Kong’s Hang Seng rising 1.6% and U.S. Nasdaq E-mini futures pointing up 0.5%.

Since the middle of July, the Australian dollar has been losing value because to falling commodities prices and China’s sluggish return to full trading capacity after three years of economic restrictions.

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