The dollar edged up in early London trading on Friday and currency traders' risk appetite was boosted only slightly by better-than-expected jobs data in the United States, as surging coronavirus cases continued to taper market optimism.
U.S. payrolls surged on Thursday but the reaction in currencies was limited. Even after two months of job recovery from May, the U.S. economy has recovered just over a third of an historic plunge of 20.787 million jobs lost in April.
Broader market sentiment improved in the U.S. session after the jobs data and overnight as Asian shares rallied to a four-month high following a brisk pickup in Chinese service sector activity.
Against a basket of currencies, the dollar rose slightly in early London trading, up less than 0.1% at 97.306 at 0740 GMT <=USD>. It is on track for its biggest weekly fall since the first week of June.
"In a week characterized by dropping FX volatility, the dollar looks to be re-establishing a gentle bear-trend as equities keep showing complacency to grim contagion news," wrote ING strategists in a note to clients.
"Such complacency still indicates the short-term outlook for risk assets is not lacking hurdles, but there is still a material chance we have seen the peak in the dollar," they added.
Riskier currencies edged up, with the New Zealand dollar up 0.3% at 0.652 versus the U.S. dollar
The euro was down slightly against the dollar, at 1.1226
Traders have been balancing hopes for an economic recovery with surging coronavirus infections, particularly in the U.S., which has seen record-high spikes in cases.
U.S. states have delayed and in some cases reversed plans to let stores reopen and activities resume.
"Even if the US job market surprised on the upside yesterday, that does not mean that it has recovered further, as the number of new infections has continued to rise recently, causing some US states to suspend their easing measures. Moreover, there are enough other trouble spots globally," Antje Praefcke, FX analyst at Commerzbank, wrote in a note to clients.
"As a result for the market the chances have risen that risk aversion will rise again over the coming days due to the negative news flow, allowing the dollar to appreciate, rather than optimism making further ground," she said.
"The downside in EUR-USD still seems to be the weaker side currently," she added.
Relations between the United States and China are also in focus over China's strategy in Hong Kong.
The U.S. Senate unanimously approved legislation on Thursday to penalise banks doing business with Chinese officials who help implement Beijing's new national security law for Hong Kong.
With U.S. markets closed for a public holiday on Friday, and no significant data releases, analysts expect a quiet day.
(Reporting by Elizabeth Howcroft;Editing by Elaine Hardcastle)
