The US dollar was trading mixed against major currencies in midafternoon trade ahead of Friday's release of March US payrolls data and the Easter holiday break, dealers said.
They noted that some accounts are squaring and, or cutting back positions before the holiday.Good Friday is not a federal government holiday in the US but many US companies grant a holiday anyway. The UK and Australia are both off on Good Friday and Easter Monday and various parts of Europe are celebrating Maundy Thursday, Good Friday and Easter Monday. Dealers said the payrolls data release on Friday while keenly awaited, is unlikely to significantly move the dollar due to fewer market participants.
As well, they said, the market focus has turned from US growth to global growth.Commodity backed currencies such as the Australian dollar are enjoying decade highs as current projections suggest world growth for 2007 coming in around 4.5 pct while US growth is likely to be 2.5-2.75 pct. AMP Capital Investors head of investment strategy Shane Oliver said base metal prices have now surpassed the cyclical high made in May last year and this has helped the Australian dollar move up towards its December 1996 high of 0.8214 usd.
"The strength in both commodity prices and the highly cyclical Australian dollar is telling us that, notwithstanding the risks hanging over the US economy, the global growth outlook remains pretty good," Oliver said.
Commonwealth Bank of Australia senior foreign exchange dealer Richard Grace said China is dominating global growth and the yuan is likely to continue to appreciate against the US dollar, albeit at a slow rate because of controls over the currency.
Grace said this should not be seen as bad thing as a greater rate of appreciation in China's exchange rate without a well-developed Chinese financial system risks damaging the Chinese economy and in the current environment, hurting the world economy. "We remain of the view that the yuan will continue to appreciate against the US dollar by about 3.5 pct per year," he said.
CMC Markets chief analyst Ashraf Laidi said now that the US economy is showing unequivocal signs of a slowdown, markets will seek a rise in the unemployment rate as the key to the Federal Reserve easing interest rates. Laidi said the employment component of last night's ISM March US services sector survey falling to lowest level since July 2004 augurs badly for Friday's payrolls.
"In the event that the jobless rate rises to 4.6 pct from 4.5 pct along with a payrolls remaining lower than 110-120,000, markets will deem the report as an additional step to a June rate cut," he said.