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Dollar retreats modestly before U.S. job data

Dollar retreats modestly before U.S. job data © Reuters. FILE PHOTO: A U.S. one dollar banknote is seen in this illustration taken November 23, 2021. REUTERS/Murad Sezer/Illustration

LONDON (Reuters) – The dollar retreated slightly on Friday but was still on course to gain over the week before the release of U.S. labour data that investors think could reinforce the case for early Federal Reserve interest rate hikes.

Traders were also awaiting the latest euro zone inflation data scheduled for release at 1000 GMT to gauge whether the European Central Bank might tilt towards a more hawkish stance.

Earlier data showed German exports grew in November despite persisting supply bottlenecks in manufacturing, while industrial output fell.

The euro rose 0.13% to $1.1315 in morning trading in Europe but was down about 0.5% for the week against the greenback..

At 0912 GMT, the which measures the greenback against major peers, was down 0.14% at 96.126 and set for weekly gains of about 0.5%.

The yen has been the most prominent casualty of the dollar’s strength in the first trading week of the year, as investors reckon the Bank of Japan will lag others on rate hikes.

The greenback hit a five-year peak on the yen at 116.35 on Tuesday and hovered around 115.81 on Friday,.

It is up about 0.6% on the yen this week and about 2.7% over five weeks. The dollar is also eyeing its best week in more than a month against the Australian and New Zealand dollars.

The release on Federal Reserve meeting minutes on Wednesday supported expectations that the Fed could raise rates as soon as March and several times this year, pushing up U.S. yields and the currency.

On Thursday, St. Louis Fed President James Bullard said the Fed could start reducing its balance sheet soon after it begins hiking. Even dovish San Francisco Fed President Mary Daly said the balance sheet reduction would follow normalising rates.

“It’s a surprise the dollar hasn’t done better this week on the surge in Treasury yields and the hawkish FOMC minutes”, said Kenneth Broux, an FX strategist at Societe Generale (OTC:) in London.

Elsewhere, sterling has held its own this week as traders figure the Bank of England will soon begin its own hiking path. It last bought $1.3546, not far from Tuesday’s two-month high of $1.3599. It is near a two-year high on the euro.

The big moves in the U.S. bond market have unsettled traders’ sentiment across asset classes. Cryptocurrencies have dropped sharply in thin holiday trade.

hit its lowest since September in Asia trading at $40,939 but recouped some losses and ticked up to $42,445.

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Currency bid prices at 0929 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.1315 $1.1300 +0.12% -0.48% +1.1316 +1.1290

Dollar/Yen

115.8450 115.8500 +0.04% +0.76% +116.0400 +115.8900

Euro/Yen

131.08 130.88 +0.15% +0.58% +131.1000 +130.8600

Dollar/Swiss

0.9208 0.9213 -0.04% +0.96% +0.9217 +0.9203

Sterling/Dollar

1.3547 1.3536 +0.07% +0.16% +1.3552 +1.3528

Dollar/Canadian

1.2718 1.2727 -0.03% +0.63% +1.2730 +1.2707

Aussie/Dollar

0.7153 0.7163 -0.14% -1.60% +0.7177 +0.7143

NZ

Dollar/Dollar 0.6748 0.6747 +0.03% -1.40% +0.6755 +0.6740

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

+0.6740

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