Reuters: US Dollar Report: GLOBAL MARKETS-Markets on hold, counting down to U.S. jobs data

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GLOBAL MARKETS-Markets on hold, counting down to U.S. jobs data Sep 6th 2013, 08:43 Fri Sep 6, 2013 4:43am EDT * Non-farm payrolls in focus, jump in U.S. yields underpins dollar * Euro struggles at seven-week low against dollar * Share markets steady, emerging markets make minor gains * Oil hovers above $115 a barrel as Syria tensions persist By Marc Jones LONDON, Sept 6 (Reuters) - Financial markets were locked in tight ranges on Friday before jobs data that could usher in a cut in U.S. monetary stimulus, after a week of sharp rises in bond yields and the first gain for stocks in a month. The dollar held near a seven-week high against a basket of currencies, benchmark U.S. and German government bond yields hovered at their highest in 2-1/2 and 1-1/2 years respectively, and European shares started steady. Nick Beecroft, senior markets analyst at Saxo Capital Markets, said the U.S. non-farm payrolls data, due at 1230 GMT and expected to show 180,000 new jobs according to a Reuters poll, should bolster the case for a cut in Fed bond buying. "We are seeing an acceleration in activity in the U.S." Beecroft said. "I remain negative on bonds, I now see 10-year treasury yields at the end of the year at 3-1/4 percent whereas previously it was 3 percent, and they will be heading towards 4 percent next year." Underlining expectations for an imminent turn in Fed policy, the euro held near a seven-week low on the back of mildly dovish comments from the European Central Bank on Thursday. Falls of 1.45 percent on the Nikkei overshadowed minor share gains elsewhere in Asia while European stocks opened little changed, with Britain's FTSE 100, Germany's DAX and Paris's Cac 40 0.1-0.3 percent lower. Earlier gains left the pan-regional FTSEurofirst 300 up over 2 percent for the week, while MSCI's world share index, which tracks 45 countries, was on course for its first weekly gain in a month. "We are in a world now where good news is once again good news for equities." Beecroft added. "I think we can safely say that equities aren't really being spooked anymore by the whole reduction in stimulus idea." EURO, BUNDS UNDER PRESSURE The euro was wallowing at $1.3122, having slid one U.S. cent to be 0.7 percent lower on the week. As well as the pressure from the stronger dollar, investors sold the common currency after the ECB said on Thursday it stood ready to act if needed to bring money market rates down and help nurture a "very, very green" recovery. ECB President Mario Draghi made the comments as government bond yields have risen sharply, tracking U.S. Treasuries in expectations the Fed will start withdrawing support. U.S. 10-year note yields hit 3 percent on Thursday for the first time since July 2011, having jumped from near 1.6 percent in four short months and providing a major support for the dollar in the process. There was little sign of any significant shifts in bond or currency markets ahead of the U.S. jobs data, with Treasury and Bund yields off their highs but only just. The dollar index, measured against a basket of major currencies, was steady near a seven-week peak but the greenback dipped 0.5 percent to 99.56 yen after it popped above 100 yen overnight to levels not seen since late July. U.S. data this week showed a solid expansion in the services sector, while private employers added 176,000 jobs in August, suggesting non-farm payrolls could be surprisingly strong. "The combination of a strong non-farm payrolls with this week's stunning U.S. ISMs ahead of the first Fed taper could send the dollar index towards 85," Societe Generale wrote in a note. TURKEY VS INDIA Worries about reduced central bank support have weighed on demand for gold, hovering near a two-week low, and riskier assets, with emerging markets also in the firing line. The Group of 20 emerging and developed powers gathered in St. Petersburg for a summit struggled to find common ground over the turmoil the prospect of a cut in stimulus could cause. The summit also had to contend with the tough question of whether to support U.S. military strikes in Syria, tensions that helped keep oil above $115 a barrel on Friday. Indonesia has had to raise interest rates to support the collapsing rupiah currency, while India's new central bank boss this week impressed some with an unexpectedly detailed and wide-ranging plan that saw the rupee and stocks rally on Thursday. The Indian rupee slipped 0.1 percent to 66.06 per dollar but it remained comfortably above last week's record low of 68.80. Strategists at Morgan Stanley recommended investors short the Turkish lira versus the Indian rupee. Link this Share this Digg this Email Reprints

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