© Reuters. In this illustration taken on May 7, 2021, a dollar bill can be seen in front of the stock chart displayed. REUTERS/Dado Ruvic/Illustration
Author: Sujata Rao
LONDON (Reuters)-The U.S. dollar edged higher on Friday. Bond yields rose to a one-week high after adjustments for inflation in the United States and expectations of strong employment data pushed the United States to accelerate policy tightening.
Fed Vice Chairman Richard Clarida hinted this week that the conditions for raising interest rates may be met as early as the end of 2022, thus laying the foundation for the dollar’s rise.
Clarida’s remarks boosted U.S. Treasury yields after falling for five consecutive weeks, and the “real” yield excluding inflation will end six consecutive weeks of decline.
US non-agricultural employment data will be released at 1230 GMT. The forecast of jobs created last month ranged from 350,000 to 1.6 million, and the consensus number is 870,000.
Such a large or larger number may further boost the U.S. dollar, especially the exchange rate against the euro and the yen, which will not see any tightening policies in the next few years.
Standard Chartered Bank (OTC:) global head of foreign exchange research, Steve England, said that even numbers close to the current consensus may trigger market reactions.
He said: “An important data that can be interpreted as an optimistic signal may strengthen interest rate expectations,” especially when the market no longer considers raising interest rates recently.
At 1115 GMT, the U.S. dollar traded at a weekly high of 92.43 against a basket of currencies. After falling 0.9% last week, it has risen 0.4% so far this week, which is the biggest drop since May.
The exchange rate against the euro is 1.1805 US dollars or up 0.2%. The weaker-than-expected German industrial order data also weighed on the euro.
The dollar hit a one-week high of 109.82 yen against the yen.
After the number of initial jobless claims fell by 14,000 to 385,000 in the week ending July 31, and the number of layoffs fell to the lowest point in more than 21 years, Thursday’s expectations for strong US employment data increased.
Vasilieos Gkionakis, global head of foreign exchange strategy at Lombard Odier Group, said that in the long run, the impact of Clarida’s hard-line comments is unlikely to last.
“In general, I still believe that we are in a business cycle stage where economic growth and global trade will remain relatively stable, which will provide some downward trend for the dollar,” he said.
The Reuters survey of strategists also agrees with this view, and most people expect the dollar to fall next year.
Elsewhere, due to the sharp drop in the unemployment rate, which has almost consolidated expectations for a rate hike this month, the New Zealand dollar is expected to hit its best week since the end of June.
Finally bought 0.7052 US dollars, AUD bought 0.7390 US dollars, slightly lower in the day [AUD/]
On Thursday, the Bank of England also established an interest rate hike path to support the pound against the dollar, closing at $1.391.
But the strong US dollar and the rising COVID-19 infection rate are hitting emerging currencies. The Thai baht is at a three-year low, falling more than 7% in seven weeks. At the same time, the Turkish lira fell 0.7% to a two-week low.