SINGAPORE, Oct 4 (Reuters) - The dollar has reached a six-week high, poised for its largest weekly gain since April, driven by safe-haven demand amid escalating tensions in the Middle East. Market activity is expected to remain subdued ahead of the U.S. non-farm payrolls figures, which are set to influence the Federal Reserve's outlook on interest rates.
Recent data indicated a slight increase in new applications for unemployment benefits in the U.S., suggesting a stable labor market as the third quarter concludes. Economists predict an addition of 140,000 jobs, with the unemployment rate expected to hold steady at 4.2%.
Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities, noted, "There is little evidence to suggest a U.S. hard landing is on the horizon," while highlighting the potential for a stronger-than-expected payrolls number to prompt discussions of a rate cut in November.
The dollar index, which compares the U.S. currency to six others, was last recorded at 101.92, just shy of its six-week high of 102.09. Meanwhile, the euro remained stable at $1.1034, having declined 1.18% this week, and the British pound hovered around $1.3131, close to a three-week low.
Investor focus has also been directed towards the Middle East, where rising tensions have caused oil prices to spike and risk-sensitive currencies to falter. The Australian dollar gained slightly but is still on track for its first weekly decline in four weeks, while the Japanese yen has seen its largest weekly drop since November 2016, reflecting dovish remarks from Japanese policymakers.
This week’s developments underscore the interconnectedness of global markets, as geopolitical tensions and economic data continue to shape investor sentiment.