US dollar hits 7-week high vs yen ahead of US jobs data

[LONDON] The US dollar rose to seven-week highs against the yen on Friday, as investors awaited US jobs data that is likely to cement expectations of a Federal Reserve interest rate hike next week.

A surprisingly robust private US jobs report from ADP on Thursday bolstered bets the monthly non-farm payrolls release due at 1330 GMT will come in strong, further strengthening the case for the Fed to raise rates at meeting next week - as signalled in recent weeks by Fed officials.

Markets are now pricing in an almost 90 per cent chance of a hike, according to Reuters data.

The US dollar climbed almost half a per cent on Friday to 115.495 yen, its highest levels since Jan. 20, leaving it up nearly 1-1/2 per cent for the week.

The US dollar index, which tracks the greenback against a basket of six major rivals, was flat at 101.80. It was on track for its fifth straight week of gains - its best run in eight months - after a quarter-of-a-per cent rise this week.

"In the near term it's going to be quite tough for there to be further US dollar strength, given how well-priced the Fed meeting is next week, and also just how much the market has priced for the year now as a whole," said currency strategist Hamish Pepper at Barclays in London. "Of course that (pricing) holds some relevance for the labour market report today - it implies that you really need to see quite a significant upside surprise if you're to see continued US dollar strength."

Economists polled by Reuters forecast that US employers likely added 190,000 workers last month.

The euro was up 0.3 per cent at a four-day high of US$1.0618 , having been boosted by comments from European Central Bank head Mario Draghi on Thursday that investors saw as somewhat hawkish.

Mr Draghi said the ECB had removed from its statement a reference to using all available measures to induce growth and inflation, "because the sense of urgency is not there".

He also said the Bank's Governing Council had discussed removing a reference to lowering interest rates in its forward guidance, and had increased its inflation and growth profile for the euro zone next year.

"In our view, these relatively hawkish comments from Mr Draghi suggest that the days of aggressive ECB easing may be behind us," IronFX analyst Charalambos Pissouros wrote in a note to clients.

"However, we would avoid euro/US dollar, considering that today's US jobs data could prove the trigger for a retreat."

REUTERS