Dollar edges higher with investors focused on labor market data 

NEW YORK/LONDON – The US dollar edged higher on Thursday in a volatile week with markets eyeing a crucial jobs report, after data indicating labor market weakness reinforced expectations the Federal Reserve will cut rates this month.

Data showed on Thursday that the number of Americans filing new applications for jobless benefits increased more than expected last week, consistent with softening labor market conditions. Furthermore, the ADP National Employment Report showed US private payrolls increased less than expected in August.

The dollar edged higher in relatively steady trade, reflecting investor wariness of making any big moves ahead of Friday’s more comprehensive non-farm payrolls report.

The dollar strengthened 0.33% to 148.585 against the Japanese yen. It was up 0.22% to 0.80615 against the Swiss franc. The greenback lost ground against both safe-haven currencies on Wednesday. The euro fell 0.13% to USD 1.16455.

“It’s been choppy … with enough questions around where the economy is at that people are just likely trying to square up before Friday’s number and not taking any outward bets one way or the other,” said Marvin Loh, senior global market strategist at State Street in Boston.

The dollar index rose 0.20% to 98.334 after dropping in the previous session.

The US dollar tends to strengthen across the board against peers if the monthly payrolls report beats market expectations, but it weakens if the data falls short of estimates, according to Goldman Sachs analysts led by Karen Fishman.

“With risks to the labor market skewed to the downside and our more dovish view on the Fed, we have been recommending being short USD/JPY with a target of 142,” the analysts wrote.

Several Federal Reserve officials said labour market worries continue to underpin their view that rate cuts still lie ahead for the central bank, boosting expectations of an imminent rate cut. The Fed is due to meet on September 16 and 17.

Traders are pricing in a near-100% chance of the Fed cutting interest rates later this month, up from 87% a week ago, CME FedWatch showed.

In the bond market, yields on long-end notes across the globe have risen as investors become increasingly anxious about the fiscal health of major economies from Japan to Britain and the United States.

US Treasury yields slipped. The 2-year note yield fell 1.8 basis points to 3.594%. The yield on benchmark US 10-year notes fell 3.1 basis points to 4.18%.

A closely watched auction of 30-year Japanese government bonds passed smoothly on Thursday.

In other currencies, the pound sterling weakened 0.12% to USD 1.34310 after gaining in the last session. The Canadian dollar weakened 0.25% versus the greenback to C$1.3827 per dollar. The Australian dollar weakened 0.44% versus the greenback to USD 0.6514.

Spot gold fell 0.35% to USD 3,546.28 an ounce, easing from a record high reached on Wednesday.

(Reporting by Chibuike Oguh in New York and Amanda Cooper in London; Editing by Kevin Liffey and Nick Zieminski)