Against a basket of currencies <=USD>, the greenback is on track
for its biggest weekly drop in a month, of 0.5% with the rise in
coronavirus cases in the U.S. weighing on sentiment.
Data due at 1230 GMT is expected to show non-farm payrolls
figures increased by 3 million jobs last month before a long
holiday weekend. U.S. markets are shut on Friday.
A larger than expected gain could help the dollar regain some
ground.
Estimates vary widely amid concerns about whether the U.S.
economy can sustain its recovery as coronavirus infections surge
and some states reimpose limits on business and personal
activity.
"A renewed significant fall in the unemployment rate would make
the market feel confident about a recovery," said Thu Lan
Nguyen, an FX strategist at Commerzbank in Frankfurt.
"In that case we would see risk-on, which should theoretically
be negative for the U.S. currency since the U.S. dollar has been
in demand as a safe haven during the crisis,"
Despite the dollar's recent spell of weakness, the greenback is
still up 2.5% from the 2020 low of 94.6 it hit in early March. A
Reuters poll predicts more weakness for the greenback over the
next 12 months due to weak global demand.
Supporting sentiment in the meantime was news that a COVID-19
vaccine developed by German biotech firm BioNTech <BNTX.O> and
U.S. pharmaceutical giant Pfizer <PFE.N> had shown potential in
early-stage human trials.
U.S. manufacturing activity also rebounded more than expected in
June, with the Institute for Supply Management's manufacturing
activity index hitting its highest in 14 months.
Similar surveys from China, Germany and France all pointed to an
improvement in factory activity.
The positive risk sentiment boosted other risk-oriented
currencies such as the New Zealand dollar <NZD=D3>, which gained
nearly 0.5% versus the greenback, and the euro <EUR=EBS>, which
advanced 0.1% to $1.1264.
The mood also lifted sterling <GBP=D3> above $1.25 for the first
time in a week. It last sat at $1.2482, having bounced almost 2%
from a one-month low hit on Monday.
Falling volatility also boosted sentiment, with a gauge of
currency market volatility <.DBCVIX> holding near a one-month
low.
(Graphic: USD positions,
https://fingfx.thomsonreuters.com/
gfx/mkt/xegpbmllrvq/USD%20positions.JPG)
(Reporting by Saikat Chatterjee; Editing by Jan Harvey and
Alexandra Hudson)
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