Euro steady; U.S. dollar set for worst week since October

Key Points
  • Against a basket of currencies the dollar has dropped every day this week for a cumulative loss of almost 1%.
  • Sterling climbed to a 2-1/2 year high of 84.28 pence against the euro overnight and has advanced 1.7% against the dollar this week, last trading at $1.3154.
  • Dollar falls to one-month low vs basket of currencies.
Matt Cardy | Getty Images

The euro was steady on Friday against the dollar, which was headed for its worst week since mid-October by concern over U.S.-China trade relations and hints of weakness in the U.S. economy.

New Zealand's kiwi rebounded amid renewed risk appetite and encouraging domestic factors.

Against a basket of six currencies, the dollar fell to a one-month low of 97.355, but was last flat at 97.424. The euro was little changed at $1.1102.

Sterling was 0.2% weaker at $1.3129 and down 0.1% against the euro at 84.49 pence <EURGBP=D3>, but close to a two-and-a-half-year high as traders grew more confident uncertainty over Brexit would end soon.

U.S. President Donald Trump said U.S.-China trade talks were "moving right along" and that "we'll have to see" about an increase in tariffs due next week.

"The U.S. market is concerned about the Dec. 15 tariffs being enacted, but I don't think this is going to happen before the end of the year," said Shannon Saccocia, chief investment officer at Boston Private, adding she has not made any investment decisions that implied the tariffs will be implemented.

But markets were unconvinced, with worries stemming from a lack of similar enthusiasm from China, keeping the dollar subdued. Chinese officials reiterated that some U.S. tariffs must be rolled back for a deal to end the 17-month trade war, something Washington has given no sign of doing. [nL4N28F1Z3]

Risk sentiment recovered, pushing the New Zealand dollar to a four-month high of 0.6569 against the U.S. dollar.

"My guess - and it's just a guess - is that the rally in NZD may have started with a recovery in risk sentiment" driven by Trump's comments, said Marshall Gittler, strategist at ACLS Global.

The currency also got a boost from Reserve Bank of New Zealand Deputy Governor Geoff Bascand, who said in a Bloomberg interview economic developments are "supportive of the story that we're near or around that turning point" in the economic cycle, Gittler said.

U.S. non-farm payrolls data due at 1330 GMT comes after dismal numbers showed weak private payrolls, soft services activity and a shrinking manufacturing sector.

A Reuters poll shows a forecast of 180,000 jobs being added in November. Anything short of that might leave the Federal Reserve reconsidering its wait-and-see mode when it meets on Tuesday and Wednesday.

"There is a greater potential for an exaggerated move if we see a big divergence from expectations," said Michael McCarthy, chief market strategist at CMC Markets in Sydney. "The risk is in both directions ... below 150,000 or above 210,000, we could see a significant market reaction."