US dollar rises after days of losses, but weak outlook intact

The dollar advanced on Wednesday, recovering from two-month lows hit the previous session, as investors lightened their short positions to book profits ahead of the all-important U.S. non-farm payrolls report on Friday.

The underlying trend though for the dollar remained tilted to the downside and Wednesday’s U.S. private sector jobs numbers affirmed that.

The jobs data supported the view that the Federal Reserve may not need to raise rates much further.

Investors are looking to Friday’s non-farm payrolls report for March, with economists polled by Reuters expecting new jobs of about 240,000.

In afternoon trading, the dollar index rose 0.4% to 101.87, led by gains against the euro, which fell 0.5% to $1.0906. Erik F. Nelson, macro strategist at Wells Fargo in London, said for now, “the bar for the dollar to keep falling is high,” noting that the greenback tracks U.S. Treasury yields, which have seen extreme moves in recent weeks.

In March, U.S. two-year yields, which reflect interest rate expectations, sank nearly 74 basis points (bps), the worst monthly fall since January 2008, which was in the thick of the global financial crisis.

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