Dollar stability ahead of US payroll data, yuan rises as business volume declines

Illustrative file photo of US dollar, Swiss franc, British pound and euro bank notes taken in Warsaw, Poland. January 26, 2011. REUTERS/Kakbar Pimple

By Stefano Ribaudo

(Reuters) – The dollar was little changed on Friday even as risk appetite recovered ahead of the US government’s release of job creation data for May.

* European stocks rose mostly as investors expected the US report to provide clues about the pace of Fed monetary tightening in the second half of 2022.

* On Thursday, the ADP’s national employment report showed that private sector jobs in the US rose at a slower than expected pace last month.

* Business on Friday was limited as financial markets in China, Hong Kong and the United Kingdom are closed for holidays.

* The dollar index settled at 101.81 against a basket of its counterparts, giving the euro stability at 1.0743 dollars.

* Investors have mixed opinions regarding the expectations of the dollar, which is still near its highest level in nearly 10 years.

– George Saravelos, global head of foreign exchange at Deutsche Bank, said the dollar is “priced at such a safe haven risk premium that it rarely sustains over time and is now in the process of reversing.”

* The most optimistic analysts argue that the Fed’s tightening cycle is based on a stronger growth record from Europe, especially after the Russian oil embargo measures that could hurt the eurozone economy.

* Among other currencies, the offshore yuan rose 0.4% against the dollar on thin trading volumes, reaching a one-month high of 6.6321, following recent positive signs for the domestic economy affected by coronavirus restrictions.

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* The yuan hit its lowest level since September 2020 at 6.83 per dollar in mid-May.

* Data from the PMI survey showed factory activity in China contracted at a slower pace in May, and Beijing authorities took measures to support the city’s economy.

(Reporting by Stefano Ribaudo. Editing in Spanish by Marion Giraldo)

Aileen Morales

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