U.S. Dollar Struggled Friday While Canadian Dollar Rallied

The U.S. dollar was under modest pressure on Friday as traders awaited a key U.S. jobs report. The data could cement expectations of a strong economic recovery. The dollar’s index traded at 90.868, near its lowest level against six other major currencies. It lost approximately 0.4% overnight.

While the greenback was softer against most currencies, the euro surged forward, gaining 0.5% on Thursday. It exchanged hands at $1.2063 at last. Against the Japanese yen, the U.S. dollar tumbled down to 109.05 yen, almost flat thus far on the week as its recovery since late April has lost steam.

U.S. payroll data is due at 1230 GMT. Analysts expect it to confirm the economy’s solid path to rebound from the pandemic. Economists think the data will show at least 978,000 new U.S. jobs for April.

Another survey showed on Thursday that the number of U.S. citizens filing new claims for unemployment benefits dropped below 500,000 last week, for the first since the coronavirus pandemic started more than a year ago.

While that’s the good news, signs of a strong job recovery could increase inflation worries. Thus far, most Fed policymakers have downplayed the risks of higher prices, hinting that they don’t plan to taper stimulus any time soon.

Bart Wakabayashi, Tokyo Branch Manager of State Street, stated that markets believe that the Fed won’t take action until the U.S. sees full employment. That will create a positive environment for risk assets like stocks.

What About the Canadian Dollar?

The Canadian dollar rallied by nearly 1% overnight, hitting a 3-1/2-year high of C$1.21455. It traded at C$1.2157 at last. Along with the Bank of Canada’s shift to more hawkish guidance, oil price gains boosted that currency.

Meanwhile, the Chinese yuan remained firm, trading at 6.4655 per dollar in offshore trade, near a two-month high.

The British pound exchanged hands at $1.3896, losing some gains made on Thursday after the Bank of England decided to slow the pace of its trillion dollars bond-purchasing program.