Dollar rises ahead of payrolls, euro edges lower

The dollar extended a rebound versus major peers on Friday ahead of a key US jobs report that could help the Federal Reserve decide whether to make an interest rate hike of up to 50 basis points next month.

The euro edged lower, following its sharp retreat the previous day from a one-month high, as some hopes for a ceasefire in Ukraine faded. It was still set for weekly gains.

The US currency has also benefited from safe-haven flows as peace talks between Russia and Ukraine stumbled, though they are set to resume on Friday.

The Federal Open Market Committee (FOMC) will next decide policy on May 5, with CME Group’s FedWatch tool showing a 68.8 per cent chance of a half-percentage-point rate increase. That would follow on from a quarter-point hike on March 16, when the Fed embarked on a new tightening cycle.

Another FOMC meeting will follow on June 14-15.

Economists predict Friday’s Labor Department report will show that close to half a million US jobs were added last month, with the unemployment rate ticking lower while wage growth accelerated.

Upside potential for the dollar index remains in scope “amid ongoing waves of fiercely hawkish Fedspeak and an aggressive frontloaded profile that includes almost 100 bps in hikes over the FOMC’s next two meetings,” Westpac strategists wrote in a client note.

They predicted a break above 100 for the dollar index “in coming weeks”.

For the euro zone, the key data on the calendar will be the euro area HICP inflation number for March, due at 0900 GMT.

The euro was 0.1 per cent lower at $1.10555 at 0800 GMT.

“The euro was dragged down by a correction in euro zone bond yields yesterday and less optimism around advancements in Russia-Ukraine peace negotiations,” said ING FX strategist Francesco Pesole.

“Markets don’t seem to be particularly rewarding the euro for the lower oil prices,” he added.

As oil prices fell, the commodity-linked Norwegian crown extended its fall to hit a two-week low versus the dollar in early London trading, before recovering some ground to trade at 8.7865.

The dollar index , which gauges the greenback against six counterparts including the euro and yen, rose 0.2 per cent to 98.535, building on Thursday’s 0.50 per cent climb.

Mid-week, it sank to a four-week trough of 97.681 amid a month-long consolidation that followed a breathless climb to a more than nine-month high at 99.415.

Cryptocurrency bitcoin slumped 1.6 per cent to $45,024, after touching a one-week low as US and European Union lawmakers moved to tighten their cryptocurrency stances.

On Monday, bitcoin had touched $48,234.00 for the first time since the start of this year.