Authors: Alden Bentley, Alun John and Rae Wee

NEW YORK/LONDON/SINGAPORE (Reuters) – The dollar fell on Thursday ahead of Friday’s U.S. jobs data, which could assist the Federal Reserve set a timetable for easing monetary policy, while the euro remained stable following a widely expected European interest rate cut. Central Bank.

The euro rose 0.17% to $1.0887, closing in on the two-and-a-half-month high of $1.0916 it hit earlier this week. Against the Japanese currency, it fell 0.09% to 169.57 yen.

The dollar rate, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.09% at 104.16, barely reacting to news that unemployment claims rose more than expected last week, to 229,000.

The weekly jobless claims number was also slightly above last week’s upwardly revised figure of 221,000. The data confirmed this week’s market narrative that labor market tensions are easing, which would be good for inflation and helped push U.S. Treasury yields lower compared to the benchmark.

Inflation in the 20 countries of the single currency has fallen from more than 10% at the end of 2022 to just above the European Central Bank’s 2% target in recent months, mainly due to lower fuel costs and a normalization of supply after post-pandemic problems.

This progress has recently stalled, and what looked like the start of a major ECB monetary easing cycle a few weeks ago now looks more uncertain amid signs that euro area inflation may prove persistent, as has been the case in United States.

“What the ECB said and did was in line with expectations that the swaps market hadn’t changed that much after making the adjustments now with the 25 basis point cuts,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. York.

Chandler was referring to differences in eurozone and US interest rates, which determine forward prices for currency pairs and influence the spot price. He said it’s not unusual for the dollar to weaken ahead of the monthly jobs data release and then recover.

The Canadian dollar strengthened 0.11% to C$1.37 per U.S. dollar on the day following an expected interest rate cut by the Bank of Canada.

Ahead of Friday’s U.S. jobs report, investors are grappling with the implications for the Fed of several other U.S. data this week that show job growth slowing, albeit alongside a recovery in the services sector.

The Federal Open Market Committee meets next week, but it is not expected to lower interest rates yet. Markets are pricing in two 25 basis point rate cuts from the Fed this year, with the first likely to come in September.

The euro also held steady against the pound and settled at 85.14 pence, although at the lower end of the recent range.

Against the dollar, sterling remained almost unchanged at $1.2790.

YEN OF GROWTH

The yen held steady at 155.65 per dollar as investors digested comments by Bank of Japan Governor Kazuo Ueda on Thursday that it would be appropriate to reduce the central bank’s bond purchases as it nears an exit from massive monetary stimulus.

The BoJ will hold a two-day monetary policy meeting next week.

“It was almost a strike from the Japanese central bank – that is, adding positive news for the JPY when the funding currencies – JPY and CHF – were already backed and repurchased, resulting in the yen rally gaining additional strength,” he added. said Chris Weston, head of research at Pepperstone.

The Japanese currency saw a brief gain earlier in the week as investors trimmed positions in yen-financed carry trades after Mexico’s ruling party’s forceful election victory raised concerns about contested constitutional reform.

This has put pressure on long peso/compact yen positions, a favorite among carry trades.

In a carry trade, an investor borrows the currency of a country with low interest rates and invests the proceeds in a currency with a higher rate of return

The peso fell slightly against the yen () to 8.8703 yen, a day after rising 2.6%. It fell about 6% against the Japanese currency earlier this week following Mexican election results.

In cryptocurrencies, bitcoin fell 0.43% to $70,887.00. fell 0.88% to $3,829.9.