By Ankur Banerjee
SINGAPORE (Reuters) – The dollar held close to a two-week high against the yen and the euro on Tuesday as investors geared up for a slew of economic data, including Friday’s U.S. payrolls, that will influence the size of an expected interest rate cut from the Federal Reserve.
The euro was last at $1.1060, not far from the two week low of $1.1042 it touched in the previous session, while the yen fetched 147.10 per dollar in early trading, close to the two-week low of 147.16 hit on Monday.
Investor focus this week will squarely be on the U.S. payrolls data due on Friday after Fed Chair Jerome Powell last month endorsed an imminent start to interest rate cuts in a nod to the worries over the labour market.
Ahead of that job openings data on Wednesday along with jobless claims report on Thursday will be in the spotlight.
Markets are pricing in a 69% chance of a 25 basis points (bps) cut when the Fed meets Sept. 17-18, with 31% probability of a 50 bps cut, CME FedWatch tool showed.
This week’s overload of labour data will be crucial in breaking the debate between a 25 or 50 bps cut in September, said Charu Chanana, head of currency strategy at Saxo.
“If the data remains robust, a 25 bps cut is more likely. However, a weak non-farm payrolls, particularly if it falls below 130k with another jump higher in unemployment rate, could push the rates market closer to pricing a 50 bps cut”
Economists surveyed by Reuters expect the addition of 165,000 U.S. jobs in August, up from an increase of 114,000 in the previous month.
The dollar index, which measures the U.S. currency against six rivals, was at 101.69 in early trading, just below the two-week high of 101.79 it touched on Monday. The index fell 2.2% in August on expectations of U.S. rate cuts.
Sterling eased a bit to $1.31425 in early trading. The Australian dollar was 0.14% lower at $0.6782, while the New Zealand dollar fell 0.18% to $0.6223.
