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The U.S. dollar hit a fresh three-month high versus other major currencies on Friday, as traders wagered strong U.S. labour data could lift it even further.

The dollar index is on track to gain nearly 1% this week, its fourth weekly rise in five weeks. It hit a high of 92.699 before losing some momentum, and was last broadly flat on the day at 92.582.

The greenback has strengthened broadly since the U.S. Federal Reserve. Federal Reserve surprised markets last month by signalling it could tighten policy earlier than expected to curb inflation.

The U.S. jobs report is due at 1230 GMT and is forecast to show a solid rise of 700,000, with traders braced for any surprises.

“The FX markets have certainly become more sensitive to incoming US economic data,” currency analysts at MUFG said in a note. “That suggests to us that positioning in FX could still be short US dollars which is resulting in this further extension of dollar strength.”

A higher number in the employment report could fuel concerns of tighter Fed policy, analysts said.

“The dollar has started July strongly; a U.S. non-farm payrolls meet or beat today would maintain that momentum,” DBS Bank strategist Philip Wee wrote in a note.

The dollar hit a fresh three-month high versus the euro ahead of the report, edging up a quarter of a percent on the day to $1.18205. It was broadly flat versus the yen and British pound.

“Many people are now arguing (over) whether the dollar has indeed bottomed, because at some point in 2023 the Fed is suggesting that it could be raising interest rates,” Paul Mackel, global head of FX research at HSBC said in an outlook call.

“Also there’s some nervousness whether the dollar’s going to start to behave in a more pro-cyclical manner, that is, if the data is stronger than expected in the U.S. that the dollar really gets more strength from that.”

The dollar clung to recent gains on Wednesday as virus woes raised concerns in a market already on edge ahead of U.S. jobs data seen as crucial to the Federal Reserve’s monetary policy outlook.

Risk-sensitive commodity currencies had led overnight losses, with the Australian and New Zealand dollars each dropping about 0.7%. The euro fell 0.2% overnight while the safe-havens of Japanese yen and the Swiss franc held steady.

Morning trading in Asia did not move majors much from those levels, with the euro last at $1.1902 and the yen at 110.58 per dollar. The Aussie bought $0.7517.
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“There’s a bit of a bearish tilt to currencies,” said Westpac analyst Sean Callow. “It’s the line you would expect on a risk-off day, and maybe it’s a bit of insurance ahead of payrolls,” he added, referring to U.S. labour data due Friday.

The dollar index rose 0.2% to hit a one-week high overnight and on Wednesday sat roughly in the middle of the range it has found in the wake of the surprisingly hawkish shift in tone from the Fed earlier this month.

The risk-averse mood was underpinned by a fresh spike in global coronavirus infections and in restrictive measures to contain them which threaten to set back the pandemic recovery.

Case counts are hitting daily records in Indonesia, lockdowns are being extended in Malaysia and expanded in Australia, while travelers from Britain are facing new restrictions as the contagious delta variant spreads.

At the same time traders are wary of a surprise from U.S. economic data, starting with private payrolls later on Wednesday but with the main focus on fuller labor figures due on Friday.

Signs of strength in the labor market could add pressure on the Fed to move even sooner on interest rate hikes, and lift the dollar, while it is vulnerable if the data misses expectations.

“It’s unusually hard to forecast and so the risk of a surprise is enormous,” said Westpac’s Callow. “Super strong could really reinforce the reaction to the (Fed) and very weak could really push back on those who bought dollars post (Fed).”

Economists polled by Reuters forecast private payrolls showing a gain of 600,000 in June, a slowdown from a month ago when 987,000 jobs were created. The forecast for Friday’s non-farm payrolls is for a rise of 690,000 jobs.

“It’s not just about non-farm payrolls, but about the whole labor market,” said Rodrigo Catril, senior FX strategist at National Australia Bank in Sydney, with hourly earnings and the unemployment rate also likely to be closely watched.

“There’s also a wide dispersion in terms of estimates which suggests that either way there will be a few disappointed with a soft number as well as a really strong number.”

The U.S. dollar fell on Friday after data showed that U.S. consumer spending was flat in May, while producer price inflation came in below economists’ expectations.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, held steady following an upwardly revised 0.9% jump in April. Economists polled by Reuters had forecast consumer spending rising 0.4%.

The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.5%, below economists’ expectations of a 0.6% increase. In the 12 months through May, the so-called core PCE price index shot up 3.4%, the largest gain since April 1992.

“The most interesting, salient takeaway from today’s data is that we’re not seeing runaway inflation,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. “The Fed by holding its fire is probably on the right side of the trade at this point.”

The dollar index against a basket of currencies fell 0.26% to 91.598.

It rose to a two-month high last Friday after policymakers at the Fed on June 16 forecast two rate hikes in 2023, indicating that the U.S. central bank will address rising price pressures sooner than previously expected.

The greenback slipped this week, however, as Fed speakers offered contrasting views on whether inflation increases are likely to be sustained.

Infrastructure spending is likely to help boost the U.S. economy after President Joe Biden announced a deal on Thursday, though it is not expected to make an impact in the short-term.

Sterling continued to weaken, a day after the Bank of England made no changes to its monetary policy.

The British pound was last down 0.08% on the day at $1.3909.

The greenback weakened to 110.58 Japanese yen, after reaching a 15-month high of 111.11 on Thursday.

That comes even as data on Friday showed that core consumer prices in Tokyo were unchanged in June from a year earlier.

“Japan is a total outlier when it comes to one of the most crucial data points in the market’s focus right now: inflation. It showed that Japan, unique among the major countries of the world, has no inflation,” Marshall Gittler, head of investment research at BDSwiss, said in a report.

The U.S. dollar held near multi-month highs on Friday as investors warily awaited U.S. inflation data, while the pound nursed modest losses after Bank of England (BoE) policymakers leaned away from flagging rate rises.

Early Asia trade was steady, with the euro pinned below its 200-day moving average at $1.1930 and the yen just short of a 15-month low at 110.955 per dollar.

The dollar vaulted to its highest levels since March against the euro last week – and to its highest since March 2020 on the yen – after the U.S. Federal Reserve surprised markets by projecting interest rate rises sooner than expected in 2023.

Subsequent rhetoric from Fed chair Jerome Powell seems to have calmed nerves in bond and stock markets about hikes any time soon, but the dollar has held its gains and traders are wary of further rises if inflation is hotter than forecast.

Economists polled by Reuters expect core personal consumption expenditures index to post year-on-year gains of 3.4%, a rise even faster than the nearly three-decade high pace of 3.1% recorded last month. The data is due at 1230 GMT.

“The dollar can jump if inflation surprises to the upside,” said Joe Capurso, head of international economics at the Commonwealth Bank of Australia in Sydney. “Upside inflation surprises have been the trend in the U.S. recently,” he said.

The stronger dollar has kept other majors in check through the week, even against currencies where rate rises are likely to land sooner than in the United States.

The New Zealand dollar has crept back above its 200-day moving average to $0.7063, but it remains well shy of February highs above 74 cents. In Australia, despite booming terms of trade, the Aussie held at $0.7584.

“A more balanced dollar outlook prevails after the Fed’s decisive policy shift,” Westpac strategist Sean Callow said.

“The Australian dollar’s strong support from commodity prices produces fair value estimates in the mid-0.80s,” he said.

“Yet recent price action has been in the mid-0.70s. With risk appetite looking resilient, any narrowing in this gap probably depends on how far the (Fed)-inspired U.S. dollar recovery can extend.”

The U.S. dollar index was steady at 91.833, off a week-ago high of 92.408 but clear of troughs below 90 that it had plumbed in May.

Sterling had started to move away from its post-Fed lows, but was the weakest G10 currency overnight and fell 0.3% after the BoE failed to provide any hint it was in a hurry to hike rates and warned against “premature tightening”.

“Some in the market obviously positioned for a less dovish or a hawkish tilt,” said Tapas Strickland, director of economics and markets at National Australia Bank.

In emerging markets, the Mexican peso surged to a two-week high following a surprise benchmark interest rate hike.

Bitcoin was steady at $34,380 and headed for a small weekly loss, as it has recovered most of a plunge below $30,000.

The dollar index, which rose after the Fed’s surprise hawkish tilt last week, gave up some of its gains on Monday, while the Australian currency stumbled on lower prices of the country’s top export, iron ore.

The dollar index, which tracks the greenback against six major currencies, slipped to 92.286 from a high of 92.405 reached on Friday, a level not seen since April 13.

It jumped 1.9% last week — the most rise since March 2020 — as the U.S. Federal Reserve signaled a sooner-than-expected end to its ultra-easy monetary policy, triggering a collapse in U.S. shares and prompting analysts to revise their forecasts for stock and currency performance.

The Fed’s policy stance has become a tailwind for the dollar, accounting for a challenging backdrop for risk assets, Westpac analysts said.

While the index has the scope to test highs reached in March after its recent impulsive gains, “there’s not enough juice for a sustained medium-term breakout beyond that”, they added.

Analysts at Goldman Sachs agreed the dollar’s gains may not be sustained, noting other central banks will need to consider policy normalization too as their economies recover from the depressed levels brought on by the pandemic.

Benchmark 10-year U.S. Treasury yields fell to the lowest since early March at 1.4110% during Asian trading, while those on 30-year bonds slid as low as 1.9990% for the first time in more than four months.

The yield curve, or the spread between two- and 30-year yields, was the flattest since early February.

As the Fed’s hawkish stance dulled investor risk appetite, the safe-haven Japanese yen rose to a one-week high against the dollar. It was last up 0.3% at 109.80 per dollar.

In other currencies, the Aussie fell to $0.7474, a level not seen since Dec. 21, 2020, driven by a 5% drop in iron ore prices as a seasonal slowdown in construction activity in top steel producer and consumer China hit sentiment.

The euro was barely changed at $1.1859, having hit a 2-1/2-month low of $1.1847 on Friday. The British pound hit a two-month low of $1.3790 on Monday.

In cryptocurrencies, bitcoin fell 4% to $34,016, while ether changed hands at $2,077.58.

The dollar rose to its highest level in almost two months versus major peers on Thursday after the Federal Reserve brought forward its projections for the first post-pandemic interest rate hikes into 2023, citing an improved health situation and dropping a long-standing reference that the crisis was weighing on the economy.

The dollar index, which tracks the currency against six rivals, ticked up to 91.459 in Asia, building on its nearly 1% surge overnight, the biggest gain since March of last year.

Only New Zealand’s kiwi made any meaningful headway against the dollar among major currencies on Thursday, climbing 0.4% after data showed New Zealand’s economy grew much faster than expected in the first quarter. The kiwi had tumbled more than 1% on Wednesday.

A majority of 11 Fed officials penciled in at least two quarter-point interest rate increases for 2023, even as officials in their statement pledged to keep policy supportive for now to encourage an ongoing jobs recovery.

The projections showed the outlook for inflation jumping this year, though the price increases were still described as “transitory.” Overall economic growth is expected to hit 7%.

“The Fed’s super hawkish pivot should reinforce the lows and offer further near-term USD support,” TD Securities analysts wrote in a research note.

“A double-whammy of higher rates and wobbly risk sentiment would result in positioning squeeze and the start of a new narrative,” possibly resulting in “a 2% broad USD rally through the summer months,” the note said.

The benchmark 10-year Treasury yield was at 1.5890% in Asia, after rallying to as high as 1.5940% from as low as 1.4820% on Wednesday.

The dollar climbed to an almost two-month high of $1.1984 per euro on Thursday, extending its gain of about 1% from the previous session.

It strengthened to as high as 110.825 yen, a level not seen since April 1, adding to a 0.6% rally overnight.

The Australian dollar dipped to $0.75975, the lowest since April 13, after tumbling 1% on Wednesday.

Sterling slipped to the lowest since May 7 at $1.39745, and the Canadian dollar hit the weakest since May 5 at C$1.2292.

Cryptocurrencies were also hurt by the dollar’s strength, with bitcoin hovering at $38,624 following a 4.5% slide Wednesday, and ether at $2,393 after a 7% selloff.

Technically Chana market is under long liquidation as market has witnessed drop in open interest by 0.83% to settled at 139750 while prices down 76 rupees.

Now NCDEX Chana is getting support at 5032 and below same could see a test of 4988 levels, and resistance is now likely to be seen at 5150, a move above could see prices testing 5224.

Chana yesterday settled down by 1.48% at 5075 on profit booking ahead of sowing report which can report higher sowing under Pulses area compare with last year.

However there is a strong possibility of shortage in pulses production, especially due to uncertainty over sowing this crop year due to the pandemic.

The country is most likely to face scarcity of pulses this year including masoor, chana and other pulses.

There could be a shortage of around 10 lakh tonne in the production of tur this year. As the apex body for the trade, IPGA is bringing it to the notice of the government well in advance to augment the supply side.

However, as per trade estimates, the production for tur has been around 2.90 million tonne, urad approximately 2.06 million tonne, moong around 2 million tonne, Chana around 9 million tonne and masoor around 0.95 million tonne.

India’s supply of Kabuli chickpea is expected to plunge 32 percent to 396,000 tonnes due to low carryout and very poor production prospects for all of India’s rabi (winter) season crops. Exports will fall to an estimated 50,000 tonnes, down from 115,000 tonnes each of the previous two years.

The situation is so dire that India is expected to import 50,000 tonnes from Canada, Argentina and Turkey. In Delhi spot market, chana gained by 22.7 Rupees to end at 5071.65 Rupees per 100 kgs.

Trading Ideas:
–Chana trading range for the day is 4988-5224.
–Chana dropped on profit booking ahead of sowing report which can report higher sowing under Pulses area compare with last year.
–The country is most likely to face scarcity of pulses this year including masoor, chana and other pulses.
–India’s supply of Kabuli chickpea is expected to plunge 32 percent to 396,000 tonnes due to low carryout and very poor production prospects
–In Delhi spot market, chana gained by 22.7 Rupees to end at 5071.65 Rupees per 100 kgs.

The dollar held near a one-month high against a basket of currencies on Wednesday as investors tried to ascertain if the Federal Reserve might alter the language on its stimulus following a recent jump in U.S. inflation.

The dollar index stood at 90.528, having hit a one-month high of 90.677 on Tuesday despite mixed U.S. economic data.

U.S. retail sales dropped more than expected in May but sales in April were revised sharply up and are way above their pre-pandemic level.

With spending rotating back to services from goods as vaccinations allow Americans to travel and engage in other activities, the data cemented the perception of a strong recovery in the economy.

Separate data showed wholesale price inflation accelerated to 6.6%, the largest gain since November 2010.

The Federal Reserve is widely expected to acknowledge the first conversations among its policymakers about when and how fast to pare back the massive bond-buying program launched in 2020 when it concludes a policy meeting later in the day.

Yet most investors think the Fed will refrain from any hints of starting tapering its stimulus in the near future.

“The Fed has said they’re going to be reactionary to the data, ….and they’ve said they want to see extended inflationary conditions before they make any commitment to tapering or hikes,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.

Wakabayashi said the dollar should rally if the Fed drops any hint that tapering will be brought forward or rate hikes are going to be looked at sooner, but added, “I think they’ll stick to the same tagline, and it will probably end up being a non-event.”

Some market players also noted the dollar could rise by default as other major currencies appear to be losing momentum.

“We have to note that the U.S. dollar is strengthening now even as U.S. debt yield has dropped below 1.5%,” said Makoto Noji, chief FX strategist at SMBC Nikko Securities.

“Today’s currency market suggests there is strong potential pressure to lift the dollar, should there be some sort of surprises from the Fed.”

The euro stood at $1.2126, little changed on the day but struggling to recover from its fall last week after the European Central Bank pledged to keep stimulus steady over the summer.

The yen was flat at 110.08 yen per dollar, near its two-month low of 110.325 touched earlier this month, with the Bank of Japan expected to extend some of its pandemic relief measures this week.

The British pound, a strong performer so far this year, hit a one-month low of $1.4035 on Tuesday despite stronger-than-expected employment data. It last stood at $1.4085.

The number of employees on British company payrolls surged by a record amount in May while pay growth marked its biggest rise since 2007 in April although statisticians warned that this was distorted by comparisons with depressed wages a year ago and greater job losses among low-paid staff.

While UK job recovery looks set to continue as the economy reopens, the rapid spread of the highly contagious Delta variant of the novel coronavirus, which forced Prime Minister Boris Johnson to delay his plans to lift lockdown, is seen as a risk.

The Australian dollar lacked traction after the country’s central bank signaled on Tuesday its willingness to extend its bond purchase program next month.

The currency changed hands at $0.7685, not far from a seven-week low of $0.7646 touched earlier this month.

In crypto markets, bitcoin traded at $40,305, having hit a near one-month high of $41,341 on Tuesday, aided by the promise of fresh investment from major backer MicroStrategy and an upbeat tweet from Tesla boss Elon Musk.

Ether had less momentum, at $2,561.

The dollar hovered below a one-month high compared with major peers on Tuesday ahead of a much-anticipated Federal Reserve meeting that could signal a change in the outlook for U.S. monetary policy.

The U.S. currency has been buoyed as traders closed short positions before the Fed’s two-day policy-setting confab, which kicks off on Tuesday.

The dollar index, which measures the greenback against a basket of six currencies, was flat early in Asia at 90.517. It has pushed briefly above 90.60 in each of the last two sessions, and 90.63 would be the strongest level since May 14.

Traders will be watching carefully for clues on when policymakers will start tapering dollar-depreciating stimulus.

So far Fed officials, led by Chair Jerome Powell, have stressed that rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time to come, although recent economic data has raised concerns that price pressure after the post-COVID-19 economic reopening could force an earlier stimulus withdrawal.

“While Powell will tread carefully, I expect that the Fed is warming to a more open discussion about tapering, to be formally announced in the September meeting,” Chris Weston, head of research at broker Pepperstone in Melbourne, wrote in a note to clients.

“Any view that cements a formal announcement in September should be modestly USD bullish, but the risks are symmetrical as Powell will be keen to not hurt financial conditions,” he wrote.

Nearly 60% of economists in a Reuters poll expect a tapering announcement in the next quarter, despite a patchy recovery in the job market.

Currency markets settled in tight ranges with implied volatility plumbing multi-month lows after last week’s strong inflation readings and a dovish European Central Bank meeting failed to dislodge currencies from recent trading levels.

The Deutsche Bank FX Volatility Index plunged to 5.6 on Friday, its lowest in nearly 16 months, and remained just above that level this week.

The euro was little changed at $1.21185 on Tuesday, near an almost one-month low at $1.20930 reached on Friday.

The yen was at 110.075 per dollar, almost flat from Monday, after a more than 0.3% slide in each of the past two sessions.

In cryptocurrencies, bitcoin traded above $41,000 for the first time in more than two weeks on Monday, and was last around $40,495 after rallying from below $35,000 on Sunday after Tesla Inc boss Elon Musk tweeted that the electric carmarker would resume allowing bitcoin transactions when miners who verify transactions use more renewable energy.

Ether also got a small lift in sympathy with its bigger rival, but remained well within recent ranges at $2,605.54 on Tuesday.