U.S. jobs data key for a lacklustre dollar

LONDON - 3 November 2017:The dollar drifted sideways on Friday after a week of losses, as markets waited for U.S. jobs data to shake the currency out of recent ranges, with some market analysts saying the currency may have peaked for now.

The Australian dollar was the big loser of the day, falling half a percent after disappointing retail sales data. The British pound dropped to a one-month low after plunging on Thursday.

The market showed little reaction to U.S. President Donald Trump's appointment on Thursday of Jerome Powell, a Fed governor, to lead the U.S. central bank. That broke with precedent by denying incumbent Janet Yellen a second term but signalled a continuation of her cautious monetary policies .

"I think the Powell news was not really a surprise for markets, who have been expecting this, but we think the dollar may have hit a short-term peak for now in the absence of any upside data surprises," said Lutz Karpowitz, an FX strategist at Commerzbank in Frankfurt.

The next big data release comes later today. The U.S. non-farm payrolls report is expected to show job numbers bounced back in October after September's drop.

Against a broad basket of currencies, the dollar edged 0.1 percent higher to 94.817, up from a one-week low of 94.411 set on Thursday.

The Australian dollar slipped half a percent to $0.7651 , coming under pressure after data showed that retail sales were flat in September. That was below market expectations for a rise of 0.4 percent on the month.

Sterling continued to fall after suffering its biggest one-day fall against the dollar since June on Thursday, when the Bank of England raised interest rates for the first time in more than a decade but said it sees only gradual rises ahead.

Sterling fell 0.2 percent to $1.3040, its lowest since Oct. 6, after losing 1.4 percent on Thursday.

Morgan Stanley strategists said the prospect of more U.S. rate increases next year would put pressure on currencies such as the Australian dollar and sterling, since households in those countries have racked up large debts in recent years.

"As the Fed continues to raise interest rates, these funding costs will rise, if not compensated by lower borrowing costs in their home currency," Morgan Stanley strategists said in a note.