U.S. Dollar Drifts Higher; Traders Eye Non-farm Payrolls

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The dollar edged higher on Thursday in choppy trading as risk appetite improved with higher U.S. stocks, although investors remained worried about the fastspreading Omicron coronavirus variant and the speed at which the U.S. Federal Reserve will taper its asset purchases.

NEW YORK:The dollar edged higher on Thursday in choppy trading as risk appetite improved with higher U.S. stocks, although investors remained worried about the fast-spreading Omicron coronavirus variant and the speed at which the U.S. Federal Reserve will taper its asset purchases.

The U.S. currency’s moves were limited though, as investors looked ahead to Friday’s non-farm payrolls report for November.

“A really strong payrolls report as we’re projecting could be another element to re-asserting the dollar,” said Mazen Issa, senior FX strategist at TD Securities in New York.

Wall Street economists have estimated the U.S. economy created 550,000 new jobs last month, a Reuters poll showed.

In afternoon trading, the dollar index, which tracks the greenback against six major currencies, rose 0.1% to 96.131.

The index dropped last week after news of Omicron first emerged, although it remains close to a 16-month high of 96.938 hit last month.

On Thursday, the United States recorded its second case of the Omicron variant, but that has had muted impact on stocks and other risk assets.

“Anecdotal evidence seems to suggest that it may not be as severe as many people feared,” said TD’s Issa.

“If there’s anything to take away from all of these is that the impact of the virus’ successive waves tends to be less and less the longer it goes. Yes, it’s still a risk, but vaccine makers are able to adjust to address it,” he added.

The United States and Germany joined countries around the globe planning stricter COVID-19 restrictions on Thursday.

The dollar rose 0.4% versus the yen to 113.155.

The greenback earlier gained after U.S. data showing initial claims for state unemployment benefits rose 28,000 to a seasonally adjusted 222,000 for the week ended Nov. 27, lower than the forecast of 240,000.

Sterling, meanwhile, rose 0.2% to $1.3298, while the euro slipped 0.2% to $1.1294 .

Scotiabank, in a research note, highlighted the euro’s allure as “a semi-haven currency.” Since the Omicron story broke last week, the euro has gained 0.9% versus the dollar.

However, Scotia expects the euro to weaken toward the $1.10/11 zone given weak near-term economic and rates fundamentals, although virus uncertainty should keep it in a $1.12-$1.14 range for now.

Currency volatility trackers remain at multi-month highs, suggesting big moves could still be in store, analysts noted.

Traders are also awaiting clarity on how quickly the Fed will taper its asset purchases, as central banks around the world grapple with how to unwind stimulus amid soaring inflation.

Fed Chair Jerome Powell reiterated in testimony to Congress on Wednesday that he and fellow policymakers will consider swifter action at their Dec. 14-15 meeting.

Several Fed officials – Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin, and San Francisco Fed President Mary Daly – on Thursday echoed Powell’s comments.

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Currency bid prices at 3:09 PM (2009 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 96.1240 96.0460 +0.09% 6.827% +96.1760 +95.8240

Euro/Dollar $1.1299 $1.1319 -0.18% -7.52% +$1.1347 +$1.1295

Dollar/Yen 113.1500 112.7600 +0.36% +9.52% +113.3200 +112.6300

Euro/Yen 127.84 127.64 +0.16% +0.72% +128.2200 +127.6500

Dollar/Swiss 0.9208 0.9205 +0.04% +4.09% +0.9221 +0.9180

Sterling/Dollar $1.3299 $1.3275 +0.19% -2.65% +$1.3333 +$1.3268

Dollar/Canadian 1.2808 1.2822 -0.11% +0.59% +1.2837 +1.2779