Dollar hits three-week high vs yen on trade optimism; U.S. jobs data awaited

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The dollar scaled a three-week high versus the yen on Friday, lifted by expectations that a protracted trade dispute between the United States and China would be resolved soon.

The greenback has gained about 0.85 percent against its safe-haven Japanese peer this week, thanks also to factors such as strong U.S. economic data and broad improvement in risk appetite.

The trade war between the world’s two biggest economies has been a major distraction for financial markets over the past year, with riskier assets in particular taking a hit on worries about the broadening business and growth impact of the conflict.

U.S. President Donald Trump said on Thursday both countries were getting very close to a trade deal that could be announced within four weeks.

On the economic front, investors will have an opportunity to gauge the health of the world’s largest economy when the March U.S. jobs report is released at 1230 GMT.

“In particular, the focus is how strong the earnings component of the jobs report turns out to be. A strong wages outcome would underline robust private consumption and hasten the rebound in Treasury yields and in turn allow dollar/yen to test fresh highs,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

The greenback extended overnight gains and rose to 111.80 yen, its highest since March 15. It last traded at 111.695.

The dollar has rebounded 1.8 percent since slumping to a six-week trough of 109.70 yen on March 25.

The U.S. currency had sunk to that low in the wake of a sharp slide by Treasury yields caused by risk aversion, triggered by growth concerns and a corresponding retreat by global equities.

Treasury yields have bounced since, with encouraging economic indicators and trade optimism helping propel Wall Street shares rebound to six-month highs.

“Hopes for a trade resolution have further boosted stock prices, but their gains now look too stretched,” said Makoto Noji, chief forex and foreign bond strategist at SMBC Nikko Securities.

“The ‘risk on’ phase could be reaching a climax, and even if the United States and China do reach a trade agreement, that could trigger ‘sell the fact’ moves.”

The dollar index against a basket of six major currencies was unchanged at 97.289 after rising 0.2 percent the previous day.

The euro was steady at $1.1225, capped firmly after data released on Thursday showed German industrial order dropped in February.

The pound was little changed at $1.3076 after shedding 0.7 percent overnight.

Sterling slipped on Thursday, snapping a three-day rising streak, as concerns rose that Britain may be headed for a protracted Brexit delay.

Source: Reuters

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