NEW YORK (Reuters) – The dollar rose on Thursday after stronger-than-expected U.S. jobs data that suggested an improving labor market, reinforcing signs that the world’s largest economy was on its way to a steady path to recovery from the pandemic.
The greenback was already on solid footing ahead of the economic reports, as currency investors bet that Thursday’s U.S. data will come out better than market forecasts.
U.S. private payrolls increased by 978,000 jobs in May, the ADP National Employment Report showed, the biggest increase since June 2020. Economists polled by Reuters had forecast private payrolls would increase by 650,000 jobs.
At the same time, U.S. initial jobless claims dropped below 400,000 last week for the first time since the COVID-19 pandemic started more than a year ago.
“You have to give the U.S. dollar merit because the economy behind it seems to be coming out of the pandemic mode and now indicators are giving us signs of clear momentum,” said Juan Perez, FX strategist and trader, at Tempus Inc in Washington.
“Ultimately, our overall situation is better business-wise and even politically as the focus becomes on major future spending to keep labor steady, if not thriving, in the remainder of the year,” he added.
Traders also awaited U.S. nonfarm payrolls report for May, due on Friday, which could set the tone at central bank meetings later this month. Wall Street economists’ consensus forecast was for 650,000 new U.S. jobs last month.
In midmorning trading, the dollar index, which measures the greenback against a basket of six currencies, rose 0.5% to 90.386. It found strong support around the 89.946 mark in recent sessions after falling 2% in April and a further 1.6% in May.
The euro, meanwhile, fell 0.5% against the dollar to $1.2143.
Against the yen, the dollar gained 0.5% to 110.10 yen.
The Federal Reserve has also started to unwind some of its asset purchases. On Thursday, the New York Fed said it would start to gradually offload its portfolio of exchange-traded funds that invest in corporate bonds on June 7, the first step in unwinding corporate bond holdings acquired during the pandemic.
In other currency news, Russia announced it would completely remove U.S. dollar assets from its National Wealth Fund (NWF), while increasing the share of the euro, Chinese yuan and gold, according to Finance Minister Anton Siluanov on Thursday. The changes are expected within a month.
The move did not have any immediate impact on currencies.
Sterling was down 0.4% versus the dollar at $1.4108 on Thursday as investors fret a little about whether a new virus variant spreading in Britain can delay plans for reopening the economy. [GBP/]
Cryptocurrencies rose, with bitcoin last up 2.6% at $38,573, while ether was up 3% on the day at $2,794.
Source: Read Full Article