On Friday, the dollar traded in narrow ranges as investors awaited a crucial employment data and considered the advantages and cons of longer-term increases in Federal Reserve rates of interest in light of the forecast for global economic expansion.
In the eagerly anticipated nonfarm payrolls data, which is published later on Friday, it is anticipated that the US economy created 225,000 more jobs in June.
The announcement comes on the heels of data released on Thursday showing that private payrolls rose sharply in the previous month while the amount of Americans filing new applications for unemployment insurance increased moderately the previous week, indicating that the labor market was still strong.
In response, expectations increased that the Fed would need to raise rates further in order to control inflation, sending US Treasury yields soaring and supporting the dollar's strength in Friday's early Asian trade.
While the New Zealand dollar recovered some of its losses from the previous trading session and increased 0.09% to $0.6163, the euro fell 0.02% to $1.0890 versus the US dollar.
While it had reached a two-week high of $1.2780 on Thursday, sterling was down versus the dollar and last traded at $1.2734. This is because markets anticipate that the Bank of England will increase the interest rates to 6.5% early in next year from their current peak of 6.25%.
According to Carol Kong, currency strategist from Commonwealth Bank of Australia, the strong US data increased market demands for a second FOMC rate rise which wasn't previously thought to be feasible. She was referring to a rise in rates from the Fed shortly after this month's probable 25-basis-point rise.
These data points imply that tonight's payrolls and possibly the average income data might surpass the consensus forecast once more, and this could strengthen the dollar even further.
The dollar index increased by 0.03% to 103.12, and the rate on 10-year US Treasury notes remained close to previous levels.
After rocketing to a 16-year peak of 5.12% on Thursday, the two-year Treasury yield, which normally represents expectations for near-term interest rates, has been steadily over 5%.
The benchmark 10-year yield remained just below the four-month high of 4.0830% from the earlier session, at 4.0431%.
As a result, the carefully monitored 2- to 10- year portion of the US Treasury yield curve, which is thought to be a gauge of economic expectations, remained sharply inverted at a negative 96.90 bps.
According to Kong, the bond market, at the very least, is still worried about how the United States' restrictive monetary policy will affect the economy, and we continue to expect the US economy to experience a recession later this year.
In other markets, the yen was last trading at 144.06 to the dollar and was expected to rise slightly this week after losing for the previous three.
Because of this week's decline in risk appetite brought on by concerns about the outlook for global growth, the Japanese yen had been supported by safe haven gains.
The Australian dollar increased 0.09% to $0.66315 but appeared poised to extend a third consecutive week of losses as China's sputtering economic recovery put additional pressure on the currency.