SINGAPORE, Aug 4 - the dollar was pinned near recent lows on Wednesday as investors waited U.S. jobs data for a guide on the interest rate outlook, while a drop in unemployment in New Zealand lifted the kiwi in anticipation that rate hikes could begin there within weeks.
The labor markets are in focus the world over as a bellwether for policy shifts, since central banks from Washington to Wellington have said that a job recovery is a precondition for raising rates.
A sharp rise in the unemployment rate, which fell to 4% in the last quarter, sent the kiwi 0.6% higher with a one-month top of $0.7066 as swaps markets fully priced in a 25 basis point cash rate hike in August.
The heat we've been warned about and hearing about the New Zealand labour market has been borne out, said analysts at the Bank of New Zealand.
This surely removes any doubt about the soon removal of its foot from the accelerator, they said, adding there is a chance of a 50 basis-point hike this month and that they anticipate the cash rate, currently at 0.25%, to hit 1% by November.
Opposite concerns seem to weigh on the greenback, as doubts over the economic recovery creep creep into bond and currency markets, with regular payroll figures due later on Wednesday and non-farm payroll figures due on Friday the next focus.
The currency of the United States Dollar fell short on the Euro during Asia session to touch $1.1875 against while stubbornly low U.S. yields supported higher-paying Asian currencies.
The South Korean won a third straight session and added 0.5% on Wednesday, while the Indonesian dollar hit a one-month high and the Singapore dollar rose to a seven-week high.
A backdrop of concerns about the Delta coronavirus variant has also put support behind safe-haven currencies such as the Swiss currency and Japanese yen.
After falling since the start of the year, the Japanese yen switched course in July and has gained about 2.5% to the dollar in a month. It touched its highest since late May in the afternoon on Tuesday and was steady at 109.02 on Wednesday.
The franc paid an upper limit of 0.90235 dollar from Tuesday, which sat at its previous seven-week high.
The big dollar picture is that there is a pullback in Fed hike expectations and we've seen the U.S. dollar go south, said National Australia BankAustralia Bank senior strategist Rodrigo Catril, adding the focus was now on the rate implications of jobs data.
We've all seen progression in the labor market, but the question is not how much is good enough, he said.
Economists polled by Reuters expect ADP payrolls data, due around 1215 GMT, to show 695,000 jobs were added last month - roughly steady on a month earlier - and for Friday's non-farm payrolls to show 880,000 jobs added in July.
Catril said it could take several consecutive months of that kind of growth, or even stronger, to make unemployment sufficiently low for the Federal Reserve to take note.
A speech at 1400 GMT from Federal Reserve vice president Richard Clarida is closely monitored for any clues about policymakers' thinking.
What is as much a Eurozone retail sales data and a U.S. services survey later on Wednesday will be in focus for readings on the state of economic recovery.
Sterling was withholding at a Thursday Bank of England meeting, buying $0.3927 with traders eying the $1.40 mark should policymakers sound hawkish about tapering bond purchases or hiking rates.
In the emerging markets, traders are awaiting central bank meetings in Thailand and Brazil with opposite expectations.
The Brazilian baht is on the brink of a multi-year trough as rates are expected to remain low for a long time, while the Thai central bank is projected to raise rates by a full percentage point to tame runaway inflation.