5 October 2001, 15:11 Forex - Dollar holds steady in midday trade ahead of US non-farm payrolls
LONDON (AFX) - The dollar held its own in quiet midday trade but
there are fears that the currency may come under pressure if key US
employment data later today comes in worse-than-expected, dealers said.
The latest US non-farm payroll figures are released at 1.30 pm and
expectations are of a fall of between 60,000 to 100,000.
"Anything beyond 100,000 is bad news and the markets will get
worried," said Ian Stannard, currency strategist at BNP Paribas. "We'll
see the dollar coming under pressure if we that sort of number, because
October will be even worse."
He said that recent employment data will not be reflected in the
non-farm payroll numbers fully because there are natural lags before
they feed in.
Most worrying was yesterday's figures for initial claims for
regular state unemployment benefits, which showed the biggest rise
since July 1992.
Even if today's data is better-than-expected, Stannard doesn't
expect too much upside for the dollar.
He said attention will then focus on what are expected to be dire
employment figures next month.
The markets are also focusing on dollar/yen and what, if anything,
is said at the G7 meeting of finance ministers and central bankers in
Washington this weekend.
"If there is no reference to the yen in the official communique,
there maybe a temptation to test the Bank of Japan's intervention
intention," said Merrill Lynch's senior currency strategist Neil
MacKinnon.
"There's been no sign of the BoJ this week," he said. "If there's
no intervention, yen could roll back to bottom of its 116-122 range
against the dollar."
Stannard doesn't expect there to be any mention of the yen by the
G7 and said there is further upside for dollar/yen, especially when
looking at the latest data from the Ministry of Finance in Japan.
These show that there have been big net outflows from Japan as
foreigners become net sellers of Japanese equities and government
bonds.
"This trend is likely to continue," he said.
There is also rising talk of imminent military action this weekend
and some jitters related to the explosion of a Russian plane above the
Black Sea.
"It does show that the market's sensitive to this type of news,"
said Stannard.
If there is military action soon, euro/dollar is likely to spike
higher as is swiss franc.
The euro continues to be rangebound but has shed some gains against
the dollar, largely on a corrective pull-back, said Stannard.
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