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Dollar dips on improved risk appetite, traders eye jobs data

05/06/2021 | 03:08pm EDT
FILE PHOTO: A U.S. Dollar banknote is seen in this illustration taken May 26, 2020.

New York (Reuters) - The dollar dipped on Thursday, hitting its lowest point in three days, as global market risk appetite improved and traders looked forward to the April jobs report due on Friday for direction.

The number of Americans filing new claims for unemployment benefits fell below 500,000 last week for the first since the COVID-19 pandemic started more than a year ago, data showed, signalling the labor market recovery entered a new phase amid a booming economy.

The Dow Jones Industrial Average hit a record high, with financials and industrials rising following the jobless claims report.

While the U.S. economy has been gaining steam on the back of massive government stimulus and an improving health situation, Federal Reserve speakers on Wednesday downplayed the risks of higher inflation.

The U.S. dollar, which is regarded as a safehaven asset, declined against a basket of peer currencies and was last down 0.34% at 90.948.

"The outlook for the dollar by many right now that it's going to be in the house of pain for quite some time," because for the most part, the markets are convinced that the Fed has Treasury yields under control, said Edward Moya, senior market analyst at FX broker OANDA in New York.

Investors were looking forward to the closely watched non-farm payrolls report on Friday, with estimates of between 700,000 and more than 2 million jobs having been created in April.

If the number is north of 1.5 million, it could lead to a spike in Treasury yields that would provide some temporary support for the dollar, Moya said.

Elsewhere, the Bank of England said it would slow the pace of its bond-buying as it sharply increased its forecast for Britain's economic growth this year after its coronavirus slump, but it stressed it was not tightening monetary policy.

"They said they are going to reduce the weekly pace of purchases, but that's not a signal and so sterling has kind of gone up and down and done nothing at the end of the day," said Erik Bregar, director and head of FX strategy at the Exchange Bank of Canada.

The pound was last down 0.15% against the weaker dollar at $1.3890 .

The euro was up 0.44% versus the dollar at $1.2058, and up 0.54% against the pound, at 0.8678 pence per euro.

Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

The Canadian dollar hit a three-and-a-half year high against the greenback, helped by oil price gains and the Bank of Canada's recent shift to more hawkish guidance.

"The Canadian dollar continues to have everything going for it fundamentally, technically, and if you look at intermarket correlations, so it's been a tough trend to step in the way of," said Bregar.

In cryptocurrencies, ether, the world's second largest crypto currency after Bitcoin, hit a record high of $3,610.04.

Bitcoin declined 1.03% to $56,919.50.

The meme-based virtual currency Dogecoin soared on Wednesday to an all-time high, extending its 2021 rally to become the fourth-biggest digital coin.

(Reporting by John McCrank in New York; editing by Alistair Bell and Bernadette Baum)

By John McCrank

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / EURO (AUD/EUR) -0.41% 0.63341 Delayed Quote.1.03%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.35% 0.76833 Delayed Quote.0.17%
BITCOIN - EURO -1.31% 32992.32 Real-time Quote.41.54%
BITCOIN - UNITED STATES DOLLAR -1.33% 39990.08 Real-time Quote.40.28%
BRITISH POUND / CANADIAN DOLLAR (GBP/CAD) 0.19% 1.71643 Delayed Quote.-1.23%
BRITISH POUND / EURO (GBP/EUR) -0.18% 1.16148 Delayed Quote.4.19%
BRITISH POUND / US DOLLAR (GBP/USD) -0.15% 1.40874 Delayed Quote.3.23%
CANADIAN DOLLAR / EURO (CAD/EUR) -0.37% 0.676801 Delayed Quote.5.52%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) -0.28% 90.34 Delayed Quote.11.23%
CANADIAN DOLLAR / SWISS FRANC (CAD/CHF) -0.46% 0.73705 Delayed Quote.6.29%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.32% 0.82057 Delayed Quote.4.69%
DJ INDUSTRIAL -0.55% 34219.73 Delayed Quote.12.65%
INDIAN RUPEE / EURO (INR/EUR) -0.28% 0.011238 Delayed Quote.0.62%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.26% 0.01363 Delayed Quote.-0.28%
NEW ZEALAND DOLLAR / CANADIAN DOLLAR (NZD/CAD) 0.01% 0.86723 Delayed Quote.-4.98%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.30% 0.71179 Delayed Quote.-0.58%
US DOLLAR / CANADIAN DOLLAR (USD/CAD) 0.35% 1.21839 Delayed Quote.-4.46%
WTI 1.04% 71.766 Delayed Quote.47.25%
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