USD AUD Exchange Rate Trends Higher Ahead of US Payrolls Data

Dollar extends rally as ADP data solidifies Fed rate-hike bets

Dollar extends rally as ADP data solidifies Fed rate-hike bets

The dollar index was last up 0.25 percent at 102.08, close to a March 2 peak of 102.26 which was a level not seen since Jan 11. The news bolstered expectations for another strong non-farm payrolls report on Friday and appeared to be the icing on the cake to a March 15 rate hike. Japan's Nikkei climbed 1 percent on the back of a weaker yen and Australian stocks added 0.4 percent.

February's ADP employment change figure showed an unexpected uptick on the month, with 298,000 new private jobs created on the month rather than the forecast increase of 185,000.

The employment figures are drawing particular interest as chances of the Federal Reserve raising interest rates several times this year could improve if the data underlines USA economic strength.

A strong showing here would increase the pressure on the Fed to take a more aggressive approach to interest rate hikes, raising the odds of rates being raised even four times over the coming year. "But some in the market may focus on the potentially negative impact higher yields have on equities, so it is hard to predict the effect of the jobs report".

Based on all these developments, the traders now feel that there is 90 percent possibility that rate hike will happen at the March meeting of Federal Reserve. The trade-weighted index declined to 75.88 from 76.18 yesterday.

US crude was up 0.6 percent at $49.57 a barrel after sliding to $48.59 overnight, the lowest since the end of November. Brent was up 0.7 per cent at $52.56 a barrel, although it was still headed for a weekly loss of almost 6 per cent.

A surprisingly robust private USA jobs report from ADP on Thursday bolstered bets the monthly non-farm payrolls release due at 1330 GMT will come in strong, further strengthening the case for the Fed to raise rates at meeting next week - as signalled in recent weeks by Fed officials.

Carl Weinberg, chief economist at High Frequency Economics, said that OPEC's recent cartel-like deal to limit output was working so far, but that the incentive within this hastily assembled deal to cheat was going up as prices were declining.

"Of course that (pricing) holds some relevance for the labour market report today - it implies that you really need to see quite a significant upside surprise if you're to see continued dollar strength". But tumbling crude prices pushed down oil giants Exxon Mobil, Chevron and ConocoPhillips, among other energy companies. The common currency gained the previous day after European Central Bank head Mario Draghi suggested it was less necessary to prop up the market through ultra-loose monetary policy.

The dollar has rallied by about 2.5 per cent against a basket of major trading currencies over the past five weeks. That helped the United States dollar jet as much as half a per cent higher to ¥114.94 before settling.

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