Asian investors trod warily ahead of a crucial US jobs report Friday while the dollar edged back against its major rivals after a surprise slump in the country’s factory activity.
After this week’s rally in the greenback following Federal Reserve boss Janet Yellen’s upbeat assessment of the US economy and hint at a possible interest rate hike, the unit tumbled Thursday as the closely watched ISM manufacturing gauge hit an eight-month low.
The news threw a spanner in the works a day before the release of non-farm payrolls figures that are largely seen as a barometer of if and when the central bank will move on rates.
“There is potential for markets to whipsaw should we see robust US jobs data tonight,” Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand, said in a client note, according to Bloomberg News.
“A stronger US labour market isn’t new news for the Fed or its watchers, rather, it is areas such as manufacturing and retail that are currently causing concern, not to mention a generalised lack of inflation. But nonetheless, payrolls data is traditionally a big market mover, so buckle up.”
After opening further down in Asia, the dollar recovered, to sit at 103.60 yen from 103.23 yen.
The euro eased to $1.1190 from $1.1199 in New York and well up from the $1.1131 in Asia earlier Thursday. The pound fetched $1.3268 against $1.3270 in US trade.
– Crude rises –
However, it retreated against higher-yielding currencies, including the Australian, Singapore and Canadian dollars, South Korea’s won, the Indian rupee and Indonesian rupiah.
Asian stock markets swung to and fro through the morning as traders jostled for positions ahead of the jobs report.
Tokyo ended flat, while Hong Kong added 0.5 percent.
Shanghai closed up 0.1 percent, while Sydney finished 0.8 percent lower and Seoul 0.3 percent higher. Wellington was marginally up and Taipei ended down.
In early European trade London rose 0.4 percent, Frankfurt added 0.3 percent and Paris gained 0.5 percent.
There was also a sense of unease after the International Monetary Fund on Thursday said it planned to downgrade its US economic forecasts in October, warning generally of a global “low-growth trap” if G20 governments meeting this weekend in China failed to act decisively and soon.
On oil markets the weaker dollar and bargain hunting helped both contracts rise, a day after diving more than three percent in reaction to comments from Russia suggesting limits on output may not be necessary.
West Texas Intermediate edged up 0.9 percent to $43.55 and Brent added 0.8 percent to $45.83 Friday, although they are down about a tenth from last month’s highs on fading hopes for a meeting between Moscow and OPEC this month to discuss a global supply glut.