Forex – Aussie holds gains after yuan surge, U.S. jobs data eyed

Investing.com – The Aussie gained in Asia on Friday in a light regional data day with the market keeping a close eye on the yuan after it surged to a near seven-month high on Thursday.

AUD/USD traded at 0.7392, up 0.23% with the currency’s fortunes closely-linked to trade with China. The People’s Bank of China set the yuan parity against the dollar at 6.8070 on Friday, compared to a close of 6.8062 on Thursday. The yuan opened trade at 6.8035.

The offshore Chinese yuan hit its highest level since October on Thursday, a move traders believe was engineered by Chinese authorities as a show of strength to scare off yuan sellers after Moody’s downgraded China last week.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was flat at 97.16. USD/JPY changed hans at 111.62. up 0.22%, while GBP/USD fell 0.06% to 1.2875.

The nonfarm payrolls report on Friday, is expected to show that the U.S. economy created 185,000 jobs last month, and will be closely watched as it is the final jobs report before the Federal Reserve Open Market Committee (FOMC) meets in June.

According to investing.com’s Fed rate monitor tool nearly 90% of traders expect the Fed to hike its benchmark rate in June from 0.75-1% to 1-1.25%.

Overnight, the dollar advanced against a basket of major currencies on Thursday, as the pace of US private-sector jobs growth surged in May, fuelling expectations of a strong monthly non-farm payrolls reports on Friday, which lifted the possibility of a June rate hike to its highest level.

Private employers added 253,000 jobs in May, according to payroll processor ADP, well above Wall Street expectations of a 185,000 rise.

In separate report, U.S. manufacturing activity ticked higher, hitting 53.5 in May, the Institute for Supply Management (ISM) said on Thursday. Economists had expected a rise to 52.8.

A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting.

Meanwhile, spending in the construction sector fell 1.4% for the month, the biggest drop in a year, and below forecasts of a 0.2% decline.

Despite the dip in construction spending, expectations of a June rate hike rose to the highest level after the surge in private-sector jobs bolstered the prospect of a strong nonfarm payrolls report.

GBP/USD continued to ebb and flow with the release of various polls on the status of the current race for No. 10.