FOREX-Dollar tumbles broadly after U.S. jobs data
The single currency failed to gain support from a recent run of encouraging economic data. Earlier, sterling was supported after the Bank of England announced no changes to interest rates or its bond-buying program and made no further statement on policy. The main focus, however, is on the U.S. nonfarm payrolls report, due out on Friday. If that data confirms a continued recovery in the job market, it will be seen as sufficient for the Federal Reserve to decide at its Sept. 17-18 meeting to start reducing its bond-buying program.
The euro failed to gain support from data showing euro zone businesses had their best month in over two years in August, because investors expect the European Central Bank on Thursday to stick to its line that interest rates will stay low to support the euro zone’s fragile recovery. The single currency was last down 0.3 percent at $1.3172 , not far from a six-week low of $1.3138, hit on Tuesday. “Even though we have seen euro zone data picking up, I don’t think it is sufficient to warrant any shift in the ECB’s stance,” said Neil Jones, head of hedge fund FX sales at Mizuho Corporate Bank. “So I do expect them to reiterate stimulus and maintain an accommodative stance to prop the euro zone economy up and this would weigh on the euro.” The ECB rate decision is due at 1145 GMT, after which the central bank’s president, Mario Draghi, will hold a press conference at 1230 GMT. The Bank of England also wraps up a policy meeting on Thursday, with some analysts expecting it to talk down markets pricing in a rate hike earlier than its own forward guidance, which could weigh on sterling.
Globally, it is now the third-largest forex centre, behind London and New York, said the Bank for International Settlements (BIS). Over the past three years, Singapore’s average daily forex turnover has grown 44 per cent, reaching US$383 billion (S$489 billion) in April this year. The pace surpassed the 35 per cent growth seen in global forex turnover. Average daily turnover for interest rate derivatives in Singapore grew 6 per cent to US$37 billion in April this year – the second-highest figure for Asia, behind only Japan’s. The figures were revealed in the BIS triennial central bank survey of turnover in forex markets. Separately, the Monetary Authority of Singapore (MAS) said the Singapore Foreign Exchange Market Committee found in its latest semi-annual forex survey in April that average daily turnover at the top 30 trading banks in Singapore had grown 6 per cent over the previous six months to US$381 billion.
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Treasury yields and bolster the appeal of dollar-denominated assets. “The August employment report is weak enough to seriously throw into doubt the tapering the market widely expected on Sept. 18th before this latest key release,” said Alan Ruskin, global head of foreign exchange strategy at Deutsche Bank in New York. “This is the kind of employment report that throws the cat among the pigeons, generating maximum uncertainty for markets.” The dollar index, which measures the greenback against a basket of six major currencies, was at 82.152, down 0.6 percent, moving away from a seven-week peak of 82.671 set on Thursday. The jobless rate hit a 4-1/2 year low of 7.3 percent as Americans gave up the search for work. Kiran Kowshik, currency strategist at BNP Paribas in New York said the report is consistent with the firm’s view that the Fed will taper in December.