Second Wind for Dollar Before Jobs Undercuts Bonds: Markets Wrap

  • Yen, euro, pound fall first day in three as labor gains seen
  • Biggest post-Brexit rally in U.S. bonds is brought up short

The dollar rebounded as Treasuries fell before U.S. data expected to show sustained growth in hiring. Global stocks headed for the best start to the year since 2013.

As the greenback stabilized Friday after a two-day tumble, the yen, euro and British pound all weakened and the Turkish lira extended losses. China’s offshore yuan pared a record weekly rally triggered by government curbs while a second intervention by Mexico’s central bank sent the peso to the top of the stack among major currencies. Oil declined and Treasuries snapped their biggest post-Brexit rally.

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Evidence of a healthy U.S. labor market could deliver a second wind to a flagging dollar hit by doubts that Donald Trump will usher in an era of fiscal easing and rapid growth. The employment report is expected to confirm a sixth straight year with more than 2 million jobs added, which may help to stem the steepest losses on a Bloomberg gauge of 10 major currencies this week. Options signal the dollar is poised for further gains against the euro.

“Provided it’s an OK payrolls figure, we’re looking at dollar bulls reasserting themselves possibly as early as next week,” said Neil Mellor, a London-based currency strategist at Bank of New York Mellon Corp. “Positions are still skewed toward dollar strength.”

Read more from our Markets Live blog here.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2 percent by 7:34 a.m. in New York after falling 1 percent Thursday.
  • The offshore yuan fell 0.6 percent to 6.8304 per dollar after a four-day climb.
  • The euro dropped 0.3 percent to $1.0578 and the pound retreated 0.5 percent to $1.2354.
  • Turkey’s lira was down 0.8 percent after touching a record low Thursday.

Stocks

  • Global stocks are poised to post the best start to a year since 2013, with the MSCI All-Country World Index up 1.7 percent this week.
  • The Stoxx Europe 600 Index fell 0.2 percent, trimming a weekly advance, as commodity producers declined. S&P 500 futures were little changed
  • Sanofi slipped 2.8 percent after Amgen Inc. won a court ruling blocking the French drugmaker and its partner from selling a cholestrol-lowering medicine in the U.S.

Commodities

  • The Bloomberg Commodity Index, which measures returns on raw materials, fell 0.1 percent as metals declined on a stronger dollar.
  • Gold retreated 0.3 percent to $1,176.20 per ounce after a three-day, 2.9 percent climb.
  • Crude futures were up 0.7 percent to $57.31 a barrel in New York after U.S. inventories fell by 7.05 million barrels last week, a government report showed.

Bonds

  • The biggest rally in U.S. Treasuries since June 27 was brought up short, with the yield on the 10-year benchmark up one basis point to 2.355 percent after sliding nine basis points Thursday.

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