Dollar edges up; Swedish crown firms despite PM resignation

© Reuters. FILE PHOTO: Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/File Photo

By Elizabeth Howcroft

LONDON (Reuters) - The U.S. dollar edged up on Monday as global markets started the week with a risk-averse tone, with currencies likely to be driven later in the week by U.S. payrolls data, an OPEC+ meeting and end of month flows.

Some analysts attributed the lack of momentum in Asian trading to a spike in COVID-19 cases in the region, as Australia's most populous city, Sydney, went into lockdown.

Indonesia is battling record-high cases while a lockdown in Malaysia is set to be extended. Thailand too announced new restrictions in Bangkok and other provinces.

At 1131 GMT, the Australian dollar, which is seen as a liquid proxy for risk appetite, was down around 0.2% on the day at $0.75735.

The New Zealand dollar was down 0.4% at $0.7045.

Currency markets were generally quiet, with the U.S. dollar index up 0.2% on the day at 91.914. Last week, it dropped 0.5%.

"It’s quiet in part because of lower vol – asset prices are firm but they’re not trending higher or lower today. I think the FX market is taking its lead from other asset markets and other asset markets are quiet," said Neil Jones, head of FX sales at Mizuho.

Investors are looking ahead to Friday's U.S. payroll data, as well as the OPEC+ meeting on Thursday to determine the direction of currency markets, which are also likely to be affected by a U.S. infrastructure bill and month-end demand for currencies such as the dollar and euro.

Softer-than-expected inflation data last week did little to ease concerns about the U.S. Federal Reserve dialling down its monetary stimulus.

Speculators decreased their net short dollar positions in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

Among a raft of economic indicators this week, Friday's payroll data is a key focus - with economists expecting an increase of 675,000 jobs.

ING strategists wrote in a note to clients that "it will probably take a jobs number closer to the one million mark to shake up the US rates curve and FX markets once again."

News of optimism about a bipartisan U.S. infrastructure agreement helped risk appetite. The infrastructure plan is valued at $1.2 trillion over eight years, of which $579 billion is new spending.

The euro was down around 0.2% against the dollar at $1.1912, while euro-dollar implied volatility gauges with a one-year maturity were close to their lowest since March 2020.

HOLDING FIRM

The Swedish crown was up 0.2% against both the dollar and euro, holding firm after the Swedish prime minister said he was resigning, handing the speaker of parliament the job of finding a new premier.

Versus the euro, it changed hands at 10.1145.

"The now former political leadership in Sweden may feel that it is in a crisis after PM Lofven lost a confidence vote last week, but there is no sense of suspense in the currency, which has pushed back higher versus the Euro today despite the situation," wrote John Hardy, head of FX strategy at Saxo Bank, in a note to clients.

"The backdrop of strong risk sentiment and the uptick in EU yields is SEK-supportive, but the question is whether enough energy can build to take out the massive 10.00 area on the chart in the near term," he added.

In cryptocurrencies, bitcoin was down 1.4% at around $34,200. It showed no reaction to Britain’s financial regulator saying that Binance, one of the world’s largest cryptocurrency exchanges, cannot conduct any regulated activity and issuing a warning to consumers about the platform.