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Friday, January 28, 2022

Dollar edges higher before U.S. jobs report as Omicron fears ease

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An employee of the Bank of Korea Exchange counts one hundred US dollars during a photo opportunity at the bank’s headquarters in Seoul on April 28, 2010. REUTERS/Jo Young-hak/File Photo

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(Reuters) – The dollar rose on Friday on a broadly calmer tone in markets as concerns over the impact of Omicron eased, but currency moves subsided ahead of a key US jobs report that could pave the way for an earlier interest rate hike from the Federal Reserve. . .

Scientists in South Africa, where the Omicron variant was first discovered last month, said current vaccines should protect against severe disease and death. The three Omicron cases identified in the United States also had mild symptoms. Read more

Elsewhere, Federal Reserve officials on Thursday joined President Jerome Powell in a hawkish stance, as San Francisco Fed President Mary Daley said it might be time to “begin crafting a plan” to raise interest rates to combat inflation, and delivered Richmond Fed Thomas Barkin supported the “normalization policy”. Read more

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“The Fed’s talk overnight was undoubtedly hawkish,” Tapas Strickland, director of economics at the National Australia Bank, wrote in a client note.

Strickland said Omicron news headlines were “net positive” overnight, helping risk sentiment recover, but with first assessments of current vaccine efficacy likely after a week or so, “expect continued volatility.”

The dollar index rose for a third day, up 0.03% to 96.117. Over the course of the week, the dollar did not change much, despite the sharp drop on Tuesday. But on Friday last week, the index fell 0.70%, the biggest drop since May.

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Testifying before Congress on Wednesday, Powell confirmed that he and his fellow policymakers would consider faster action at their December 14-15 meeting. Read more

Economists in a Reuters poll estimate that the United States created 550,000 new jobs last month, continuing a streak of strong data.

The money market is seeing high odds that the Federal Reserve will raise the target rate by a quarter point at its June meeting.

The dollar was down 0.09% to 113.10 yen on Friday, but that came after rising 0.4% overnight.

The euro was little changed at $1.13025, consolidating after dropping to a nearly 17-month low of $1.1186 last week.

The risk-sensitive Australian dollar fell 0.12 percent to $0.7084, in its fourth losing session.

Both the European Central Bank and the Reserve Bank of Australia have stuck to dovish positions, pushing back on market bets that policy makers will have to bend to inflation pressures.

“We continue to expect the Aussie move in the near term to be Omicron-driven and the risk remains low below $0.7000,” Joseph Capurso, strategist at the Commonwealth Bank of Australia wrote in a report.

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As for Friday, the US labor market is taking center stage, Caporso said, and should keep the currency markets calm.

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(Reporting by Kevin Buckland) Editing by Shree Navaratnam

Our Standards: Thomson Reuters Trust Principles.

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