Dollar Rebound Hinges on Whether Jobs Data Spur Fed Into Action

The dollar has work to do to convince traders that its first weekly gain in a month wasn’t a fluke.

A gauge of the U.S. currency rose the most since November this week after Federal Reserve officials signaled interest-rate increases may not be far off. Next week’s March jobs report, which is forecast to show a 207,000 gain in nonfarm employment, will help determine whether the greenback can sustain its rebound from a nine-month low reached on March 17.

"Payrolls data should keep Fed rate expectations and the U.S. dollar supported," said Valentin Marinov, head of Group of 10 foreign-Exchange strategy at Credit Agricole SA’s corporate and investment-banking unit in London. Next week’s data may “make a case of further normalizing investors’ central bank rate expectations to the benefit of the dollar."

The dollar has slumped more than 4 percent since the end of January on speculation that U.S. policy makers won’t be able to tighten policy amid a darkening outlook for global growth. The losses were exacerbated when the Fed scaled back forecasts for rate hikes at its March 15-16 meeting, only to be followed by officials signaling this week that the central bank may raise rates in the next few months.

The Bloomberg Dollar Spot Index rose 1.3 percent to 1,201.29 this week, its first gain since the five days ended Feb. 26. The greenback, which climbed against most of its 16 major peers, added 0.9 percent to $1.1167 per euro. It was up 1.4 percent to 113.08 yen after falling last week to the lowest since October 2014.

For some participants in the $5.3-trillion-a-day currency market, the dollar’s shakeout this year suggests it’s headed for a turning point. The dollar index is down 2.3 percent this month and has lost 2.5 percent this year.

U.S. payrolls grew by 242,000 workers in February, exceeding most economists’ forecasts. The next set of data, to be released April 1, will be used by policy makers and market participants to gauge the health of the world’s biggest economy.

“So long as economic-data prints continue to be relatively mixed with a positive slant, you’re going to see that modest push upward on the dollar,” said Jennifer Vail, head of fixed-income research in Portland, Oregon, at U.S. Bank Wealth Management, which oversees $125 billion.

To contact the reporters on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net, Rachel Evans in New York at revans43@bloomberg.net. To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net, Paul Cox, Amit Prakash

By: Lananh Nguyen and Rachel Evans

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