Dollar extends rally ahead of US jobs report

[NEW YORK] The dollar rose for the third straight day on Thursday, the eve of the US jobs report, a key gauge for the Federal Reserve as it looks to raise interest rates.

On Friday the Labor Department releases its report on the US employment market in April, with analysts predicting a slight slowdown to 207,000 net new jobs created, after 215,000 in March. The unemployment rate is expected to hold at 5.0 per cent.

The Labor Department reported on Thursday an increase in US claims for unemployment insurance last week but the jobs market remains tight.

Initial jobless claims rose to 274,000 but the trend "is still extremely low," said Ian Shepherdson of Pantheon Macroeconomics.

"At their current level, claims are comfortably consistent with payroll growth of 200,000-plus." The dollar rose 0.7 per cent to $1.1404 per euro. The greenback edged up 0.2 per cent against the Japanese currency at 107.26 yen. Before the three-day rally, it had fallen to a nine-month low against the euro on Monday.

"A run of mixed US data depicts the dollar at a fork in the road with it looking for direction from America's monthly jobs report," said Joe Manimbo of Western Union Business Solutions.

Mr Manimbo noted that sentiment had dimmed recently for the dollar and the world's top economy. "A jobs print near or better than expectations would stand to give both a lift," he said.

Investors have discounted the prospects for the Federal Reserve to raise interest rates soon, although the June policy meeting remained a remote possibility.

The Fed's December rate hike brought the benchmark federal funds rate up a mere quarter point after seven years near zero.

"With the US economy approaching 'full-employment,' a further improvement in the labour market paired with signs of stronger wage growth may put increased pressure on the Federal Open Market Committee to raise the benchmark interest rate at the next... meeting in June," said DailyFX currency analyst David Song.

AFP