Euro maintains firm tone day after Trichet signals rate hike
By William L. Watts and Lisa Twaronite, MarketWatch
LONDON (MarketWatch) — The dollar edged lower versus most major rivals in range-bound action ahead of a key U.S. jobs report that’s expected to provide evidence of an improving labor market.
The dollar index (DXY 76.55, +0.07, +0.09%) , which measures the U.S. unit against six major currencies, changed hands at 76.455, off slightly from 76.473 late Thursday.
Economists polled by MarketWatch expect a 218,000 gain in nonfarm payrolls in February after an increase of 36,000 in January. Read more on jobs report outlook.
“U.S. payrolls are of importance today, although we don’t think the data should be overplayed,” said Steven Barrow, currency strategist at Standard Bank.
Since January payrolls took a hit from bad weather, February is due to bounce back. But it will be difficult to discern how much of the rebound is due to the weather-inspired rebound, he said.
Meanwhile, Federal Reserve officials appear committed to very steady monetary policy, meaning only a big surprise in the payrolls data in either direction will significantly alter policy expectations, Barrow said. In addition, market sentiment has been taking cues from events in the Middle East, which may further undercut the ability of payrolls to significantly impact trade, he said.
The euro (EURUSD 1.3958, -0.0010, -0.0716%) erased early weakness to trade at $1.3972, up slightly from $1.3963 in late North American trading on Thursday. See real-time currency quotes and tools.
The 17-nation shared currency on Wednesday jumped to its highest level versus the dollar since November after European Central Bank President Jean-Claude Trichet signaled that a rate hike was likely next month. Higher interest rates are generally positive for a currency, as investors seek higher-yielding assets. Read more on ECB.
“The ECB is sending a strong signal to the market — policy rates are not appropriate any more and the tightening process should start sooner rather than later,” Frederik Ducrozet, euro-zone economist at Credit Agricole, said in a note to clients.
“That said, Trichet did not hint at a series of quick rate hikes,” Ducrozet said.
Against the Japanese yen, the dollar (USDYEN 82.8000, +0.3900, +0.4732%) bought ¥82.65, compared with ¥82.38 late Thursday.
The British pound (GBPUSD 1.6270, -0.0003, -0.0184%) traded at $1.6297, up from $1.6277 late Thursday.
The Australian dollar (AUDUSD 1.0118, -0.0026, -0.2563%) slipped to $1.0123 from $1.0158 late Thursday.
