Dollar sags to one-month low vs yen as payrolls data looms

The dollar slid to a one-month trough versus the yen and a one-week low on the euro on Friday, as a mixed bag of U.S. job market indicators stirred caution ahead of a crucial monthly payrolls report later in the day.

A report on Thursday showed the number of Americans filing new applications for jobless benefits declined last week as layoffs remained low. That helped allay fears that the labour market was deteriorating rapidly, after figures released the previous day showed private jobs growth slumped to a 3-1/2-year low in August.

Traders currently see 41% odds for a super-sized 50-basis point (bp) Fed interest rate cut on Sept. 18, versus 59% probability of a quarter-point reduction, according to the CME Group’s FedWatch Tool. A day earlier, wagers on the larger cut stood at 44%, but a week ago it was 30%.

The mixed data leaves traders guessing before Friday’s payrolls print, with economists surveyed by Reuters predicting an increase of 165,000 jobs in August, up from a 114,000 rise in July.

“Payrolls number will likely come out on the weaker side, as most economists submitted their forecasts last week without seeing these leading indicators,” said Shoki Omori, chief Japan desk strategist at Mizuho Securities, pointing to the private jobs report in particular.

“I see a negative outcome, (but) of course if the overall print comes out strong, recent history tells us that USD/JPY can jump up roughly 80c,” to around 144 based on current levels, he said.