Dollar strengthens in early trade

6 Apr 2023 , 08:22 AM

The dollar increased on Thursday but hasn’t moved much away from a recent two-month low as traders assessed the potential impact of crucial U.S. jobs data that will be released over the long weekend.

The eagerly anticipated U.S. non-farm payrolls report on Friday will come after dismal services sector data from the Institute for Supply Management (ISM), private employment data, and U.S. March manufacturing activity at the beginning of the week.

The abundance of weak economic data has increased worries about an oncoming recession in the biggest economy in the world, reducing risk appetite and causing traders to look for safe-haven assets.

The U.S. dollar index increased by 0.1% to 101.95 in the most recent session after falling to a two-month low of 101.40 the previous day.

The safe haven bids also helped the Japanese yen, which was last slightly higher at 131.01 per dollar.

The risk-sensitive Australian and New Zealand dollars fell 0.29 and 0.27 percent, respectively, in the meanwhile.

U.S. shares declined on Wednesday as a result of the disappointing report, but Treasuries rose, causing the benchmark 10-year yield to drop to its lowest level since September. When bond prices rise, yields decrease.

The yield on the 10-year Treasury note last was at 3.3126%, while the yield on the two-year note, which normally rises in lockstep with predictions for interest rates, was at 3.7922%.

With traders expecting for more information when Federal Reserve Bank of St. Louis President James Bullard speaks later on Thursday, the gloomy economic indicators have increased the belief that the Fed may change course on interest rate increases.

In an interview with Bloomberg TV on Wednesday, Cleveland Fed President Loretta Mester, a well-known hawk, said it was too soon to say if the Fed would need to raise its benchmark rate at its upcoming policy meeting in early May.

The probability that the Fed would maintain rates at its following meeting has increased from 43% to 55%, according to U.S. rate futures markets.

Rate reductions are also being factored into prices beginning in July and continuing until the year’s conclusion.

In other currency news, the euro fell 0.2% to $1.0886 and the pound fell 0.1% to $1.2450.

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