Investing.com – The U.S. dollar was slightly lower on Friday, activity slowed ahead of the widely watched monthly U.S. jobs report and the Japanese yen settled more than a year into next week.
At 04:25 ET (0825 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 105.110, its worst week in nearly two months.
Dollar weakens ahead of jobs numbers
The dollar has been falling for much of this week after the Fed chairman all but ruled out the possibility of a rate hike, signaling the U.S. central bank is still leaning toward a possible rate cut, even if it may take longer than initially expected.
“The bias following the FOMC decision was clearly bearish on the dollar, and despite today’s US jobs risk event, markets continued to squeeze dollar longs yesterday and overnight,” ING analysts said in a note.
Attention now turns to the closely watched monthly US jobs report.
Jobs likely increased by 238,000 last month after rising by 303,000 in March, while the rate is expected to hold below 4% for the 27th straight month.
Powell made clear the importance of upcoming economic data for policy decisions after the US central bank left interest rates unchanged on Wednesday.
Financial markets still expect the central bank to begin its policy easing cycle in September, but with strong numbers, that window could start to close.
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“Overall, our 210K wages forecast means we don’t expect today’s data to impact the dollar’s bearish momentum as markets may fully price in September’s rate cut and keep short-term dollar rates capped,” it added. ING.
Eurozone output still weak
In Europe, shares rose 0.2% to 1.0743, helped by recent dollar weakness.
Recent economic news from the eurozone has hardly helped, however, with March falling 0.3% from the previous month, according to data released earlier on Friday.
The eurozone’s manufacturing sector remained in contraction territory in April, while the VDMA said German manufacturers deepened the decline in their order books in March, according to a final report published on Thursday.
This signaled a rate cut in June, but there remains great uncertainty about what will happen to monetary policy after that.
traded 0.2% higher at 1.2555 after the data.
The figure rose to 55.9 in April from 53.1 the previous month, indicating the UK’s dominant services industry remains healthy, potentially giving the Bank of England room to delay interest rate cuts.
Yen on track for big weekly gains
In Asia, the pair fell 0.2% to 153.26, with the pair on track to post a weekly fall of more than 3%, its biggest since December 2022.
Japanese authorities were linked with about 9.16 trillion yen ($59.8 billion) of intervention to support their currency this week, Bank of Japan data showed.
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These forays into the foreign exchange market typically occurred during periods of thin liquidity: the country went on holiday on Monday, and a second attempt occurred late on Wednesday after Wall Street closed.
“The second round of yen intervention in one week, which followed a less aggressive than expected FOMC statement on Wednesday, sent a signal to markets that the Treasury is less tolerant of yen depreciation this time around following the intervention,” ING said. .
Other Asian currencies rose slightly, benefiting from a one-day decline in the dollar.
The pair rose 0.3% to 0.6579 as markets brace for potentially aggressive signals next week. Australia’s higher-than-expected inflation figures led markets to largely overestimate expectations of any RBA rate cut in 2024, giving the Australian dollar some strength.