By Rocky Swift
TOKYO, April 6 (Reuters) - The dollar gained slightly on
Thursday but hasn't strayed too far from a recent two-month low
as traders weighed how pivotal U.S. jobs data coming out during
a holiday weekend will impact Federal Reserve policy.
The closely watched U.S. non-farm payrolls report on Friday
will follow disappointing services sector data from the
Institute for Supply Management (ISM) and private employment
figures on Wednesday as well as a slump in U.S. March
manufacturing activity at the start of the week.
The slew of soft economic data has added to fears of an
impending recession in the world's largest economy, putting a
lid on risk appetite and sending traders in search of some safe
haven assets.
The U.S. dollar index was up 0.1% at 101.95, having
slid to a two-month trough of 101.40 in the previous session.
The Japanese yen also found some support from safe
haven bids and was last roughly 0.2% higher at 131.01 per
dollar.
Meanwhile, the risk-sensitive Australian and New Zealand
dollars slid 0.29% and 0.27%, respectively.
"Weak economic data continues to weigh in on investor
sentiment, triggering a flight-to-safety bid," analysts at
Westpac said in a note to clients.
The soft data sent U.S. shares lower on Wednesday while Treasuries advanced, which saw the benchmark 10-year yield
falling to its lowest since September . Yields fall
when bond prices rise.
The 10-year Treasury yield was last at 3.3126%, while the
two-year yield , which typically moves in step with
interest rate expectations, stood at 3.7922%. "The key to FX is going to be that interplay between what
the what the U.S. economy numbers dish up as far as interest
rates and sentiment about Fed policy," said Ray Attrill, head of
FX strategy at National Australia Bank.
The dour economic signs have strengthened the view that the
Fed will reverse course on rate increases with traders hoping
for more insight when Federal Reserve Bank of St. Louis
President James Bullard speaks later on Thursday.
Cleveland Fed President Loretta Mester, a known hawk, said
in an interview with Bloomberg TV on Wednesday that it was too
early to know if the Fed would need to raise its benchmark rate
at its next policy meeting in early May.
U.S. rate futures markets are currently pricing in a 55%
chance of the Fed leaving rates unchanged at its next meeting,
up from a 43% chance a day earlier.
Rate cuts are also being priced in as early as July and
through to the end of the year. In other currency action, sterling declined 0.1% to
$1.2450, while the euro slipped 0.2% to $1.0886.
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(Reporting by Rocky Swift and Rae Wee; Editing by Edwina Gibbs)
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