CURRENCIES: Dollar Rebounds As Traders Look To Jobs Data For Inflation Hints

The dollar advanced against all other major currencies on Friday, as traders waited for the closely watched U.S. jobs report that could help steer the future of Federal Reserve rate hikes.

What are currencies doing?

The ICE U.S. Dollar Index climbed 0.2% to 92.041, trimming its weekly loss to 0.1%.

The euro fell to $1.2053 from $1.2068 late Thursday in New York, when the shared currency traded at its highest dollar level in three years.

The pound exchanged hands at $1.3543, compared with $1.3552 on Thursday.

The yen also declined against the dollar, with the greenback buying Yen113.28, up from Yen112.75 on Thursday.

What is driving the markets?

The dollar rose as all eyes were on the top-tier nonfarm payrolls report out at 8:30 a.m. Eastern Time. Investors are particularly looking for a read on the strength of wages as a gauge of inflation, as it could weaken or strengthen the case for more rate rises this year.

Read:Lack of wage growth will likely dampen celebration of December jobs report (

The minutes from the December Federal Reserve meeting out earlier this week showed policy makers were relatively upbeat on the outlook for the U.S. economy, but still worried about the persistently low inflation levels.

That means the wage growth data out on Friday could take on more significance than usual, as it could encourage a more hawkish stance at the Fed, analysts said.

What are strategists saying?

Viraj Patel, foreign-exchange strategist at ING, said he's expecting a 170,000 gain for nonfarm payrolls and 2.5% year-on-year wage growth.

"Such a scenario is unlikely to jolt markets -- although above-consensus job gains and limited inflationary signs would be a Goldilocks outcome for risky assets," he said.

"Moreover, we note that the dollar has de-coupled from positive U.S. data surprises in recent months -- an added sign that it has lost its status as an investment currency, with negative structural factors and political risks playing a greater driving role. The latter two forces are set to persist over 2018 and therefore fading any post-NFP dollar rally remains our preferred tact. Look for the DXY index to stabilize in the 91.50-92.50 range," he added.

(END) Dow Jones Newswires

January 05, 2018 07:15 ET (12:15 GMT)