Dollar flat to slightly up as investors cautious ahead of U.S. payrolls

© 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 Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The U.S. dollar was little changed to slightly higher on Monday, with investors mostly cautious ahead of Friday's U.S. non-farm payrolls report that could dictate the direction of the Federal Reserve's monetary policy.

Market forecasts showed increased hiring of 690,000 jobs for June, compared with 559,000 in May, and lower unemployment at 5.7% versus 5.8 the previous month, according to a Reuters poll.

The dollar has been on an upside trajectory since the outcome of the Federal Open Market Committee meeting a few weeks ago, as Fed officials penciled in two rate hikes for 2023.

"The potential for an upside surprise (in the U.S. jobs data) that pulls monetary tapering and tightening expectations forward is looming ever bigger for investors," said Karl Schamotta, chief market strategist at Cambridge Global Payments (NYSE:GPN) in Toronto.

"A number significantly above the 700,000 mark could really get the dollar freight train running, and no one wants to be tied to the tracks if that happens," he added.

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

Investors are also looking at U.S. consumer confidence date on Tuesday as well as the Institute for Supply Management's manufacturing index on Thursday for clues as to where interest rates are headed.

Softer-than-expected inflation data last week did little to ease concerns about the Fed dialling down its monetary stimulus, as investors pared back bearish dollar bets.

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

"The trigger of the U.S. dollar short-squeeze was the hawkish shift at the June 16 FOMC meeting, which prompted a fierce re-pricing of the Fed's rate expectations and lifted the dollar across the board," said Francesco Pesole, FX strategist, at ING in a research note.

He added that the euro and sterling, which saw a reduction in net long positions, have carried the brunt of Fed expectations.

In mid-morning trading, the dollar index was up 0.1% on the day at 91.828.

The euro was slightly lower at $1.1929, while euro-dollar implied volatility gauges with a one-year maturity were close to their lowest since March 2020.

Against the yen, the dollar was flat to slightly lower at 110.705.

The Australian dollar, seen as a liquid proxy for risk appetite, was down around 0.3% on the day at US$0.7569, while the New Zealand dollar was down 0.3% at US$0.7046.

In cryptocurrencies, bitcoin was down 0.8% at around $34,509. It showed little reaction to Britain's financial regulator saying that Binance, one of the world's largest crypto exchanges, cannot conduct any regulated activity, and issuing a warning to consumers about the platform.

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Currency bid prices at 10:29AM (1429 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 91.8260 91.7670 +0.08% 2.050% +92.0170 +91.6990

Euro/Dollar $1.1925 $1.1937 -0.10% -2.40% +$1.1944 +$1.1903

Dollar/Yen 110.7050 110.7900 -0.07% +7.15% +110.9750 +110.6200

Euro/Yen 132.00 132.23 -0.17% +4.00% +132.3400 +131.9000

Dollar/Swiss 0.9192 0.9169 +0.25% +3.90% +0.9214 +0.9170

Sterling/Dollar $1.3915 $1.3870 +0.33% +1.86% +$1.3939 +$1.3877

Dollar/Canadian 1.2326 1.2282 +0.37% -3.19% +1.2347 +1.2290

Aussie/Dollar $0.7570 $0.7589 -0.24% -1.59% +$0.7601 +$0.7554

Euro/Swiss 1.0962 1.0945 +0.16% +1.43% +1.0969 +1.0946

Euro/Sterling 0.8565 0.8599 -0.40% -4.16% +0.8602 +0.8567

NZ $0.7046 $0.7070 -0.31% -1.85% +$0.7086 +$0.7033

Dollar/Dollar

Dollar/Norway 8.5200 8.4910 +0.35% -0.77% +8.5490 +8.4870

Euro/Norway 10.1558 10.1323 +0.23% -2.97% +10.1796 +10.1345

Dollar/Sweden 8.4663 8.4879 -0.39% +3.29% +8.5071 +8.4621

Euro/Sweden 10.0971 10.1363 -0.39% +0.21% +10.1494 +10.1030