The greenback dropped against just about every major currency Tuesday as traders look to US jobs data this week for the next steer on market direction.
Commodity producers were among the biggest gainers, with New Zealand’s dollar and South Africa’s rand advancing close to 1%. The euro also got a bump following comments on stimulus withdrawal from European Central Bank official Robert Holzmann.
The Bloomberg dollar index has tumbled nearly 1.5% from its recent peak, coming under additional pressure following last week’s appearance by Federal Reserve Chair Jerome Powell, who sounded a cautious note note on employment even as he signaled the central bank could start scaling back asset purchases this year.
“Markets continue to liquidate long-dollar positions following Powell’s Jackson Hole speech last week,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. “Friday’s nonfarm payrolls will be a key data print for markets,” and a much better-than-expected number could halt the dollar’s decline, he said.
A strong US employment report could increase the chance that the Fed will kick off tapering as soon as next month, according to NatWest Markets Plc. That would bode ill for higher-yielding emerging-market assets. Growth in US payrolls probably slowed in August after increasing by the most in almost a year the previous month, according to the median estimate in a Bloomberg survey of economists.
The Bloomberg Euro Index is heading for its eighth straight day of gains, the longest streak since March 2020, when the coronavirus crisis turned global. South Africa’s rand has led emerging-market currency advances in the past week, turning around a monthly performance that was among the worst within the group.
A technical chart signals a further drop in the US currency. The Bloomberg Dollar Spot Index has slid below an upward trend-line support that connects lows in June and August amid bearish momentum, as shown by technical indicators such as MACD and stochastics oscillator.
“Markets are no longer worried about Fed taper and rate hikes,” said Qi Gao, a currency strategist at Scotiabank in Singapore.