Dollar recovered with yields ahead of employment data

The U.S. dollar recovered quickly from a decline on August 5. This came after comments from a top U.S. Federal Reserve official suggested that the central bank may ease support for the recovering economy earlier than expected.

Moreover, the official’s bullish comments on the U.S. economy triggered a recovery in U.S. Treasury yields. Remarkably, it turned currency market attention away from the release, just two hours earlier, of a surprisingly weak private employment report.

The greenback rose from being down 0.3% to up 0.3% on the opposing signs on whether the U.S. solid economic growth and higher interest rates or a serious drag from the COVID-19 pandemic are likely.

Furthermore, the currency markets have anticipated Friday’s non-farm payroll reports to be the next significant catalyst for exchange rates.

At mid-day in New York, the U.S. dollar index against major currencies surged 0.3% to trade at 92.268.

The Japanese yen was a big beneficiary of the greenback’s initial fall on the ADP report. The currency advanced to 108.77 per dollar but couldn’t hold the break below 109. The U.S. dollar surged 0.5% and was last trading at 109.5.

Moreover, the euro and British sterling also swung versus the dollar. The euro fell by 0.2% was last trading at $1.1836. Meanwhile, the pound dipped 0.1% to $1.3903.

According to Federal Reserve Chair Jerome Powell and other policymakers, forthcoming employment reports will be critical to the board’s decisions about when and how to cut back on support for the economy.

The dollar declined in recent weeks as dipping yields have made strategists question whether the U.S. economy will rise as much as they had anticipated in light of the spread of the highly infectious Delta strain of coronavirus.

The risk-sensitive currency, the New Zealand dollar, made strong gains for the second consecutive day after a decline in unemployment in the country raised expectations that rate hikes could begin within weeks.

The currency rose by 0.4% against the greenback and traded at $0.7044.

On Tuesday, New Zealand’s central bank had announced it would soon start consulting on ways to reduce mortgage lending standards as it tries to control an inflated housing market.

The biggest cryptocurrency in the world, Bitcoin, gained 3% to settle at $39,421.

Meanwhile, Ether, the second-largest cryptocurrency, surged 8% to trade at $2,706.17. The rise came ahead of an upcoming change in the Ethereum blockchain network that will take some tokens out of circulation.

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