Dollar firms, U.S. stocks steady before jobs data

Thu Oct 6, 2016 4:24pm EDT
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By Lewis Krauskopf

NEW YORK (Reuters) - The U.S. dollar gained on Thursday against a basket of currencies, hitting its highest level in more than two months and pressuring gold prices, as strong labor market data gave support to a possible U.S. interest rate hike later this year.

The benchmark S&P 500 stock index ended barely higher while Treasury yields rose to three-week highs as investors positioned ahead of the closely watched U.S. employment report due out on Friday.

In an encouraging sign for the labor market, data on Thursday showed the number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low.

Oil prices continued to climb, with U.S. crude breaking through $50, spurred by an informal meeting among the world's biggest producers on output cuts and plunging U.S. crude inventories.

The dollar rose to its highest against the yen JPY= in a month, and pinned sterling GBP= firmly to a three-decade low on worries about Britain's exit from the European Union. Against a basket of currencies, the greenback .DXY gained 0.6 percent.

Strong U.S. jobs numbers could cement expectations of a Federal Reserve rate increase later this year and ripple through markets. Economists polled by Reuters forecast nonfarm payrolls to increase by 175,000.

Traders were betting on a 64-percent chance the Fed will hike rates in December, up slightly from a day earlier, according to the CME FedWatch website.

“If you look at the economic data for the past month, pretty much across the board it’s better and in some cases materially better than expectations," said Walter Todd, chief investment officer at Greenwood Capital Associates in Greenwood, South Carolina. "All of that would seem to push the Fed to move."   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) as the market closes in New York, U.S., October 3, 2016.  REUTERS/Lucas Jackson