Dollar gains ahead of key U.S. jobs data

Dollar gains ahead of key U.S. jobs data

Dec 3 Reuters -- The dollar went up against its more risk-sensitive Australian and New Zealand counterparts on Friday, ahead of key U.S. jobs data that could clear the path to earlier Federal Reserve interest rate hikes, even as Omicron uncertainties cloud the outlook.

On Thursday, Fed officials joined chair Jerome Powell in striking hawkish positions, with San Francisco Fed President Mary Daly saying it may be time to start crafting a plan to combat inflation, and Richmond Fed President Thomas Barkin expressing his support for normalising policy. The continued spread of the Omicron COVID 19 variant globally buoyed havens like the dollar and yen and pressured riskier currencies. Omicron has quickly established itself as the dominant strain in South Africa, where it was first discovered last month, and has now been found in five U.S. states including Hawaii.

Sean Callow, a currency strategist at Westpac, said that G 10 FX is very risk-off on renewed jitters about the Omicron cases popping up in very distant parts of the U.S.

The dollar index, which measures the dollar against six major peers, gained 0.09% to 96.173, setting it up for a 0.11% advance for the week. That would be the sixth weekly gain since January 2015, the longest weekly gain since January 2015.

The dollar is in a bullish cycle if you strip out the noise in the market at the moment, which is driven by uncertainties around Omicron, said Kyle Rodda, a market analyst at IG in Melbourne.

The Fed is going to increase the pace of the tapering programme in December and set up rate hikes well before the middle of next year, based on the fact that the US economic outperformance is fairly entrenched for the time being, and we're pricing in that. Money markets believe that the Fed will raise the target rate by a quarter point at its June meeting.

Powell said in testimony to Congress on Wednesday that he and fellow policymakers will consider swifter action at their December 14 -- 15 meeting.

The United States created 530,000 jobs last month, following a run of strong data, according to economists in a Reuters poll.

The dollar was flat at 113.21 yen.

The euro was barely changed at $1.12975 after its drop to an almost 17 month low of $1.1186 last week.

The Aussie dropped 0.26% to $0.7076, a fourth losing session, and earlier touched a 13 month low of $0.70625.

In a report, Joseph Capurso, Commonwealth Bank strategist Joseph Capurso said that the risk remains below $0.7000 and that near-term AUD moves will be driven by Omicron.

The European Central Bank and Reserve Bank of Australia have stuck to dovish stances and push back against market bets that policymakers will have to bow to inflationary pressures, as per the European Central Bank and Reserve Bank of Australia.