(Updates with early New York trading activity, adds NEW YORK
Dollar struggles to hold Wednesday surge
Euro falls a touch after ECB minutes
Oil price rise increases stress on euro and sterling,
NEW YORK/LONDON, Oct 6 (Reuters) - The dollar rose on
Thursday, extending its gains from the previous day as investors
looked ahead to Friday's key U.S. payrolls report for signs of
softness that could signal slowing U.S. rate hikes and possibly
a weakening in the greenback after this year's sharp rally.
The euro was down 0.5% to $0.9841, falling a
little after the release of European Central Bank minutes from
last month's meeting that showed policymakers were worried that
inflation could get stuck at exceptionally high levels.
Separately, a source told Reuters on Thursday, citing
provisional figures, that the German government expects Europe's
largest economy to slide into recession next year, contracting
0.4% as an energy crisis, rising prices and supply bottlenecks
take their toll.
Sterling was down 1.1%, while the dollar was
slightly higher versus the Japanese yen and Swiss
Currency markets have struggled to find a clear direction
this week, following a dramatic third quarter. The dollar
initially slid against most majors, before regaining ground.
A dollar index measuring the greenback against a
basket of currencies was 0.4% higher, and remains up about 17%
for the year so far.
"It's the calm before the storm - the non-farm payrolls
storm," said Edward Moya, senior market analyst at OANDA in New
"Everyone knows the Fed has been consistent with their
messaging. The Fed is not done bringing down inflation, and they
are locked into this aggressive rate-hiking campaign that will
only change once we start to see inflation come down. That will
obviously come along with a deterioration in the labor market
and all of these key economic readings we follow."
A major factor driving currency markets currently has been
changing expectations of how aggressively central banks' -
particularly the Federal Reserve - will raise interest rates.
A key question is whether policymakers will pivot from
primarily worrying about inflation to also considering slowing
economic growth, and possibly leading to more cautious interest
U.S. inflation data next week will be closely watched.
Data Thursday showed the number of Americans filing new
claims for unemployment benefits increased by the most in four
months last week, though some of the larger-than-expected jump
in jobless claims reported by the Labor Department was partially
blamed on Hurricane Fiona.
U.S benchmark Treasury yields whose recent gains
had helped drive the greenback higher, were up slightly.
The Australian dollar was down 1% at $0.6430, still
struggling after an unexpectedly modest 25 basis point hike in
Investors have also been paying close attention to oil
prices and news that OPEC+ agreed to tighten global crude supply
with a deal to cut production targets by 2 million barrel per
day (bpd), the largest reduction since 2020. Oil prices were
holding near three-week highs.
The dollar was up 0.7% against the Canadian dollar.
(Additional reporting by Alun John in Hong Kong and Tom
Westbrook in Sydney; Editing by Hugh Lawson and Nick Zieminski)