U.S. Dollar Eases Ahead of Payrolls Report

By Laura Matthews and Saqib Iqbal Ahmed

NEW YORK (Reuters) – The U.S. dollar eased against most major currencies on Thursday in choppy trading as investors braced for Friday’s U.S. payrolls report, which could shape the path of interest rate cuts from the Federal Reserve.

The dollar has come under pressure in recent sessions as signs of slowing growth in the U.S. economy have lifted the chances of the Fed cutting rates with more urgency.

Fed Chair Jerome Powell last month endorsed an imminent start to interest rate cuts amid concerns over a softening labor market.

Data on Thursday showed the number of Americans filing new applications for jobless benefits declined last week as layoffs remained low. This report helped allay fears that the labor market was deteriorating, following data that showed U.S. private jobs growth hitting a 3-1/2-year low in August.

Economists surveyed by Reuters expect an increase of 165,000 U.S. jobs in August, up from a rise of 114,000 in July.

“There’s this looming sense that a downturn in the economy is coming, but these latest numbers don’t show that,” said Adam Button, chief currency analyst at Forexlive in Toronto.

“I think the market is flip-flopping between 25 and 50 basis points on every data point,” Button remarked.

Markets are pricing in a 59% chance of a 25 basis points cut when the Fed meets on Sept. 17 and 18, with a 41% probability of a 50 bps cut.

The euro was 0.2% higher against the dollar at $1.1106, a one-week high. The Dollar Index, measuring the U.S. currency’s strength against six major peers, was 0.2% lower at 101.08.

Against the Japanese yen, the dollar fell 0.3% to 143.35 yen, a one-month low. Safe haven demand and expectations for imminent rate hikes from the Bank of Japan have supported the Japanese currency.

The options market indicates traders are preparing for potentially significant moves in currencies on Friday, with overnight implied options volatility at its highest since the banking crisis of March 2023 for the euro and at its highest in a year for the yen.

The pound rose 0.2% to $1.31715 on Thursday. The Bank of England meets in two weeks to set monetary policy, with traders seeing a low chance of a rate cut this month, but a quarter-point cut fully priced in for November.

The Australian dollar reversed earlier losses to trade up 0.1% on the day, drawing support from a still-hawkish Reserve Bank of Australia.

With investors avoiding riskier assets, cryptocurrencies slipped on Thursday. Bitcoin fell 2.6% to $56,510 and ether declined about 2.8% to $2,387.