By Brigid Riley and Harry Robertson
TOKYO/LONDON (Reuters) -The U.S. dollar held steady on Friday ahead of key U.S. payroll figures later in the day, after the yen climbed to a nine-week high as market players piled on bets for more interest rate hikes in Japan.
Britain’s pound ticked higher after dropping on Thursday, when the Bank of England cut interest rates and slashed its UK growth forecasts.
After a volatile week punctuated by back-and-forth market-moving headlines on U.S. tariff threats, traders settled in for the jobs data while keeping a wary eye on geopolitics and U.S. President Donald Trump’s broad policy moves.
Economists polled by Reuters expect the unemployment rate to have remained unchanged at 4.1% last month while projecting the economy added 170,000 jobs.
But analysts warn that January employment data may be difficult to interpret due to annual revisions, while wildfires in California and frigid temperatures in the United States are expected to have held back job growth.
The dollar index, which measures the greenback against the yen, sterling and other peers, was last flat at 107.63.
The U.S. currency has fallen around 2.1% from Monday’s high of 109.88 as investor nerves over global trade war risks have eased.
“The biggest driver for FX (on Friday) should be U.S. payroll figures for January,” said Francesco Pesole, currency strategist at ING.
“A lot of focus will be on annual benchmark revisions. Last year’s provisional revisions indicated that, upon cross-referencing with tax data, the Bureau of Labor Statistics had overestimated job creation by approximately one-third.”
Markets currently see about a 43% chance that the Federal Reserve will deliver a quarter-point cut in July, according to the CME FedWatch tool.
Britain’s pound rose 0.22% to $1.2465 after falling 0.54% on Thursday when the BoE lowered rates to 4.5% and said the UK economy would grow just 0.75% this year, half the previous forecast.
The pound fell as much as 1.1% just after the decision but regained some ground when BoE Governor Andrew Bailey told Bloomberg that markets should not read too much into a switch by some policymakers to vote for deeper rate cuts.
The euro edged up 0.1% to $1.0393.
YEN STRENGTH
The yen rose on Friday on bets that the BoJ will cut rates more than previously expected this year, supported by wage data earlier this week.
The dollar fell below 151 yen for the first time since Dec. 10 in early Asian trade, although it was last up 0.2% at 151.77.
Adding to the higher rate expectations were comments by Bank of Japan board member Naoki Tamura, one of the board’s most hawkish members, who said on Thursday the central bank must raise rates to at least 1% in the latter half of fiscal 2025.
“(Tamura) was a little bit more hawkish than before … I think there is less a chance that the BOJ will delay a rate hike until September,” said Mizuho’s Yamamoto.
Barclays strategists Shinichiro Kadota and Lhamsuren Sharavdemberel anticipate further falls in the dollar-yen currency pair in the near-term, with a focus on the results of Japan’s wage negotiations.
The early days of the Trump administration have kept investors on edge. Trump at the last minute suspended planned tariff measures against Mexico and Canada this week, but imposed additional 10% levies on imports from China, which quickly announced measures of its own on U.S. imports.
On the U.S. monetary front, Fed officials are weighing Trump’s policies as they try to figure out where to take interest rates.
(Reporting by Brigid Riley in Tokyo and Harry Robertson in LondonEditing by Shri Navaratnam, Kim Coghill and Aidan Lewis)
