FOREX-Dollar edges up, gets some relief ahead of U.S. jobs data

Masayuki Kitano and Ian Chua
Tuesday, 22 Oct 2013 | 12:00 AM ET

* Dollar bears back off a bit as Sept U.S. jobs data looms

* Report delayed from early Oct due to U.S. govt shutdown

* Any upside surprise could lift dollar

* But dollar bounce on upside surprise may be limited

SINGAPORE/SYDNEY, Oct 22 (Reuters) - The dollar edged higher on Tuesday, holding above eight-month lows as investors hedged their bets in case U.S. payrolls date later in the day is stronger than expected.

The dollar index, which tracks the greenback's performance against a basket of major currencies, edged up 0.1 percent to 79.779, holding above Friday's 8-1/2 month low of 79.478 but still down more than 1 percent from a peak touched last Wednesday.

The dollar has been hit hard as investors bet this month's 16-day government shutdown would take a toll on the world's biggest economy, forcing the Federal Reserve to maintain its massive stimulus program until next year.

Chicago Federal Reserve President Charles Evans said as much when he told CNBC television it would be "tough" for the Fed to have enough confidence in the economy by its December meeting to start scaling back stimulus.

Analysts polled by Reuters expect payrolls to have increased by 180,000 in September, with the jobless rate steady at 7.3 percent. The data, which was due out earlier this month before being delayed by the shutdown, will be released at 1230 GMT.

Any strength in the jobs data could be used as an excuse to buy the dollar, while a disappointing outcome may reinforce expectations that the Fed would hold off from scaling back its stimulus this year, pressuring the greenback, analysts say.

There might be some return of speculation about the possibility of Fed tapering in December, if nonfarm payrolls show an increase of around 180,000 and there are also upward revisions to the July and August numbers, said Hiroki Shimazu, senior market economist for SMBC Nikko Securities in Tokyo.

"I think about 60 percent to 70 percent of market players now expect tapering to start some time between next January and March, but we could see that change," Shimazu said.

Still, analysts say any bounce in the dollar in the event of an upside surprise could be limited, since the September jobs data will shed little light on the economic impact of this month's U.S. government shutdown.

In addition, the prevailing market expectation for the Fed to wait until 2014 to trim back its bond-buying stimulus could be hard to dislodge, due to the looming risk of another fiscal standoff in Washington.

"Tapering probably won't start this year, since it is already clear that there could be a repeat of the tumult from fiscal negotiations early next year," said Daisuke Karakama, market economist for Mizuho Bank in Tokyo.

The fiscal deal clinched last week by U.S. lawmakers restored government funding through Jan. 15 and extended its borrowing authority through Feb. 7.

Against the yen, the greenback nudged up 0.2 percent to 98.33 yen, pulling away from a one-week trough of 97.55 plumbed Friday.

With several currencies near crucial chart levels, traders said it was no surprise that investors were taking a more cautious approach ahead of the payrolls report.

The euro eased 0.1 percent to $1.3666. The euro had hit an 8-1/2 month high of $1.3704 on Friday, nearing its 2013 peak of $1.3711 set in February.

The Australian dollar held steady at $0.9648, staying below a 4-1/2 month high of $0.9680 set on Friday.

A move above 97 U.S. cents would see the Aussie retrace half of its April-to-August fall and open the way for an attempt to move back to parity.