Dollar, bond yields rise with all eyes on U.S. jobs

Fri Dec 6, 2013 7:07am EST
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By Toni Vorobyova

LONDON (Reuters) - The dollar rose and government borrowing costs from Japan to Germany hovered around fresh highs on Friday, on expectations of strong U.S. data that would back the case for an imminent scaling-back of Federal Reserve stimulus.

U.S. non-farm payrolls, due at 1330 GMT, could tip the balance of when the Fed will begin to trim the $85 billion a month of bond purchases which have dominated trading across the globe and supported risk assets for months.

A better-than-expected employment picture from the ADP private sector jobs report and weekly jobless claims in the last two days have prompted markets to prepare for a possible beat to forecasts of an increase of 180,000 in U.S. payrolls.

German 10-year yields held at seven-week peaks on Friday, while Bund futures were 1 tick up at 139.97, on track for their biggest weekly fall since mid-August.

In Japan, 10-year cash JGB yields were highest since early October, while U.S. Treasury yields on Thursday rose to levels not seen since mid-September - when Fed tapering was last seen as imminent.

The market would tend to see anything over 200,000 on non-farm payrolls as greatly adding to the chances of a start to tapering this month, while a result under 150,000 would diminish the likelihood, likely prompting a relief rally in risk assets.

"A very strong payroll would give greater confidence that the U.S. has weathered the recent government shut down well," said Luke Bartholomew, investment analyst at Aberdeen Asset Management.

It would "increase speculation that tapering could still be on the cards for December. So, perversely, a strong number could be damaging for stocks and other risk assets."   Continued...

A woman walks past a stock quotation board outside a brokerage in Tokyo September 2, 2013. REUTERS/Toru Hanai