Greenback set for best month in 4½ years

London

THE US dollar was heading for its biggest monthly rise since November 2016 on Wednesday, supported by traders' trepidation ahead of unpredictable US labour data and concern over the spread of the Delta coronavirus variant.

The US dollar has gained about 2.5 per cent against a basket of currencies in June, mostly in the wake of a surprisingly hawkish shift in the Federal Reserve's rates outlook. Traders think it could move sharply in either direction if labour data this week provides clues as to the pressure on policymakers.

On Wednesday, risk-sensitive and commodity-exposed currencies nursed the largest losses, after the Australian and New Zealand dollars fell about 0.7 per cent against the US dollar on June 29, and the Canadian dollar lost about 0.5 per cent.

They were steady in the European session, as were the safe havens of the Japanese yen and the Swiss franc which held their own through June 29.

That left the euro at US$1.1900, the yen at 110.49 per US dollar and the Aussie at US$0.7518 - all within sight of recent milestone lows against the dollar.

The US dollar index, which measures the greenback against a basket of six major currencies, was steady at 92.041 after touching a one-week high of 92.194 on June 29.

A test of the near-term US dollar outlook arrives this week with US labour data. Signs of strength could add to inflationary pressure on policymakers to move sooner on rate hikes, while a miss might put some padding into the timeline.

Private payrolls are due later on Wednesday, but the main focus is on more comprehensive labour figures due on Friday.

Economists polled by Reuters forecast private payrolls showing a gain of 600,000 in June, a slowdown from a month ago when 987,000 jobs were created.

The average forecast for Friday's non-farm payrolls is for a rise of 700,000 jobs, but the variation among the 83 estimates is large, ranging from 376,000 to more than a million. Besides the looming data, a fresh spike in global coronavirus infections and restrictive measures to contain them kept a lid on currency movements.

Data showed the sharpest fall in the value of bets against the US dollar in three months occurred last week, a boost for the greenback as the shorts buy US dollars to close positions.

Sterling traded flat at US$1.3832. REUTERS