By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The dollar consolidated versus major rivals in range-bound trade Friday as investors awaited October U.S. nonfarm payrolls data and kept a close eye on developments in Greece, a day after the European Central Bank delivered an unexpectedly early rate cut.
No clear theme emerged in Asian and European trade as investors awaited the 8:30 a.m. Eastern time release of the U.S. labor market data, said Adam Cole, global head of FX strategy at RBC Capital Markets.
The dollar index DXY +0.01% , which tracks the greenback against a basket of six major rivals, edged higher to 76.735 from 76.645.
Economists surveyed by MarketWatch produced a forecast for a rise of 90,000 in nonfarm payrolls last month, while the unemployment rate is forecast to remain at 9.1%.
A stronger-than-expected payrolls report a month ago produced the “conventional” forex response, with the dollar strengthening, Cole said. The dollar responded to expectations the Federal Reserve would react by shying away from further easing, with traders ignoring the typically dollar-negative rise in risk appetite.
“Three of the last six [payrolls] releases have followed this pattern and three were dominated by the impact of risk appetite,” Cole said, in a note.
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Since expectations the Fed could react to weak data by pursuing a third round of quantitative easing have evolved, a stronger-than-expected report would be likely to again produce a stronger dollar, he said, while calling the dollar/yen pair “the safer, less ambiguous play on October’s figures.”
The dollar traded at USDJPY -0.04% 78.02 yen versus the Japanese currency, little changed from ¥78.06 late Thursday.
The euro EURUSD +0.09% traded at $1.3843 versus the dollar, up just slightly from $1.3839 in North American trade late Thursday.
The euro sank Thursday after the ECB, in the first meeting presided over by Mario Draghi, cut its key lending rate by a quarter point to 1.25%. Draghi warned the euro-zone economy was likely headed for a “mild recession” by year-end. The weakening economy is expected to pull inflation back below the ECB’s target near but just below 2% in 2012, he said.
But the negative impact of the rate cut on the euro was offset by a rise in risk appetite after Greek Prime Minister George Papandreou shelved a controversial plan to hold a referendum on the country’s latest bailout package.
Fears that a “no” vote would derail the latest rescue plan, trigger a disorderly default and potentially lead to Greece’s exit from the euro sharply undercut risk appetite earlier this week.
While the cancellation of the referendum “may justify the better tone of EUR/USD relative to its position earlier this week, it is clear from the huge amount of political uncertainty engulfing both Greece and Italy at present that this crisis still has the capacity to throw a lot of mud at the euro in the coming weeks,” said Jane Foley, senior currency strategist at Rabobank in London.
She said heavy shorts in the euro give the currency the appearance of resilience as traders cover positions, but that the unit remains “clearly vulnerable.”
The Swiss franc was under pressure. The euro EURCHF +0.65% rose 0.7% to trade at 1.2215 francs, while the U.S. dollar USDCHF +0.56% gained 0.5% to trade at 88.18 centimes. There are 100 centimes in a franc.
The euro led the move. Cole said there appeared to be no catalyst other than the perception that value was re-emerging in euro/Swiss franc longs as the spot price approached the Swiss National Bank’s floor of CHF1.20 in recent sessions.
The British pound GBPUSD -0.12% edged lower to $1.6022 from $1.6047.
William L. Watts is a reporter for MarketWatch in Frankfurt.
