The dollar held on to solid gains in Asia after strengthening Thursday as expectations for another U.S. interest-rate increase this year climbed.
Investors have been boosting bets on higher rates this week amid strong economic data and upbeat comments from Fed officials.
The September jobs report could prompt a bull run on the dollar, said Stephen Innes, head of Oanda’s forex trading in Asia. With some hurricane impact expected, the market could sidestep any disappointment in the numbers but better-than-expected wages reading could give traders the clearest signal of going long on the greenback, he said.
“There is too much lining up for a stronger dollar narrative by the end of the year.” He expects the USD/JPY pair to touch Y113.20 and AUS/USD to test $0.7750 levels as soon as after the jobs data is out.
Meanwhile, the euro edged slightly higher in Asia after falling 0.5% Thursday to $1.1704 amid continued political uncertainty in Spain.
Investors still think the European Central Bank will continue to gradually reduce its bond-buying program and that’s what matters for the euro. The ECB September meeting minutes released on Thursday did little to change their sentiment. Jane Foley at Rabobank said: “I don’t think that opinion is going to alter very much.” She added:: “They [investors] know the quantitative easing tapering is coming.”
At 0350 GMT, USD/JPY was 112.85-86, EUR/USD was 1.1701-04 and GBP/USD was 1.3094-96.
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Global policymakers are becoming complacent during a moment of calm, doing too little to prepare their economies for a future downturn, the leaders of the International Monetary Fund and World Bank said Thursday.
As finance ministers and central bankers prepare to descend on Washington for the annual meetings of the World Bank and IMF, the institutions’ leaders, World Bank President Jim Yong Kim and IMF Managing Director Christine Lagarde previewed the message they will be delivered in coming days.
“We should not let a good recovery go to waste,” Ms. Lagarde said. “We know what can happen if we let the moment pass. Growth will be too weak, and jobs too few.”
Now is the time for advanced economies to really think about the reforms that they need to make to prepare themselves for potential downturns in the future,” Mr. Kim said.
The remarks set the theme for debate and conversation for next week’s meetings. Though most of the conclusions at the IMF and World Bank aren’t binding, policymakers often feel pressure to respond.
“There are two ways to approach a moment like this,” Ms. Lagarde said. “The first is to sit back, enjoy the progress, and wait for the next crisis before making big changes. As a former finance minister, I understand the appeal of this path.”
But she added: “IMF research has shown that reforms are more potent and easier to implement when economies are healthier.”
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