The dollar licked its wounds on Friday after taking steep quarterly losses against major rivals, as investors awaited the nonfarm payrolls report for the latest reading on U.S. labor conditions and potential clues to the monetary policy outlook.
The dollar index, which tracks the greenback against a basket of six rival currencies, edged down slightly to 94.565 .DXY, after shedding more than 4 percent in the first quarter for its worst performance since the third quarter of 2010. It notched a five-month low of 94.319 in the previous session.
Against the yen, the dollar slipped about 0.2 percent to 112.38 JPY= after skidding more than 6 percent in the first quarter, its biggest loss since the third quarter of 2009, as market turmoil sent investors into the perceived safety of the Japanese currency.
The Bank of Japan's quarterly tankan survey of business confidence, published earlier on Friday, showed large manufacturers' business sentiment deteriorated to its lowest level in nearly three years and was expected to worsen in the coming quarter.
Large manufacturers expect the dollar to average 117.46 yen in the fiscal year which began on Friday, the survey showed.
The euro edged up about 0.1 percent to $1.1386 EUR=, after gaining more than 4 percent for the quarter and hitting a more than 5-month high of $1.4120 on Thursday.
Traders and investors are awaiting Friday morning’s U.S. employment report for March from the Labor Department. This report is arguably the most important economic report of the month. The key non-farm payrolls number is expected to show a rise of just over 200,000 in March. Trading in many markets could become volatile in the immediate aftermath of the jobs report.
Federal Reserve New York President William Dudley has been on the wires over this past hour, speaking at the Virginia Association of Economists' annual meeting.
In the speech, he explained that the fears of runaway inflation have proved unwarranted while the US economy is in a relatively good place. He Said that Yellen's message is if economy stays on current trajectory, Fed will gradually raise rates.
Dudley repeated that the Fed is proceeding cautiously because of uncertainty in rest of world and that the Fed is also proceeding cautiously because of risk management considerations. In respect to the dollar, he said that the fluctuating greenbacks demand does not say much about policy and that negative rates are not on the table in US while the next Fed move on rates is likely to be up not down.
The number of Americans filing for unemployment benefits unexpectedly rose last week, but a sharp drop in layoffs in March suggested the labor market momentum remained intact.
Labor market strength, however, has not been accompanied by robust wage growth, making it unlikely the Federal Reserve will raise interest rates soon. The U.S. central bank is also keeping a cautious eye on international developments.
Initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 276,000 for the week ended March26, the Labor Department said on Thursday. Economists had forecast claims remaining unchanged at 265,000 in the latest week.
In overnight news, inflation in the Euro zone remains troublingly low. Eurostat’s flash estimate showed annual inflation in the region was at minus 0.1% in March, following a reading of minus 0.2% in February. The March number was in line with expectations. However, the European Central Bank wants to see an annual inflation number for the Euro zone of up 2.0%.
** Ratings agency Standard &Poor's has cut its credit outlook for the mainland and Hong Kong from stable to negative. At the same time, S&P is warning it might downgrade the country's overall rating this year or next.
Standard &Poor's says it's revised its credit outlook because China's economic rebalancing is likely to proceed more slowly than first expected. In making the statement, S&P does say China's economic growth should remain at or above 6-percent annually over the next three years.
** Moody's Investors Service on Thursday lowered its rating outlooks for Singapore's three big banking groups to "negative" from "stable." The U.S. ratings agency said asset quality and profitability are likely to be pressured by a "more challenging operating environment" this year and "possibly beyond."
The outlooks represent expected rating trajectories over the next 12 to 18 months. The "negative" label applies to four entities in three groups: DBS Bank and parent DBS Group Holdings, Oversea-Chinese Banking Corp. and United Overseas Bank.
Reference: FXStreet, Reuters, Kitco, People, Asia.Nikkei
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