Dollar Set To Surge On Payrolls. By Nicholas Hastings

U.S. non-farm payrolls later Friday should help the dollar to surge ahead.

The recovery in the global economy remains painfully slow. The chances of major economies following Australia and exiting their emergency monetary policies looks increasingly unlikely.

And, most importantly, a continued lack of global appetite for risk will play into the U.S. currency's safe-haven hands.

Earlier this week, the U.S. Federal Reserve appeared to concur with this somewhat gloomy view.

Instead of edging towards the easy-monetary-policy exit, or even giving financial markets a better idea of when it might do so, the U.S. central bank repeated its prediction that current policy will remain for an "extended period."

The bank may have outlined the risks posed by a shift in inflationary expectations, but it also made it clear that any such shift is unlikely.

The actual $25 billion reduction in the bank's agency purchase program may have got markets excited for a brief moment or two on the assumption that this might the start of a wind-down. But it was soon evident this was all more to do with book-keeping and little to do with actual policy.

The policy outlook from other major central banks this week suggests a similarly bleak assessment for economic recovery as that implied by the Fed.

The European Central Bank left its policy unchanged and the Bank of England, which like many economists remains highly concerned about the strength of the U.K. economy, actually extended its quantitative easing program in another effort to ease credit conditions down at the consumer level.

The bank may only have raised the amount by GBP25 billion, rather than the GBP 50 billion that some expected, but the increase was still a reminder of the fragility of the U.K. economic upturn.

Elsewhere, the Bank of Canada has expressed concern about the strength of the Canadian recovery while in little New Zealand, the level of unemployment has soared to levels last seen in the year 2000. Canada and New Zealand, it was hoped, were among the countries following closely behind Australia's recovery from the slump.

But, back to the U.S. and non-farm payrolls.

There were hopes that this lagging indicator would finally start showing an improvement and ensure an end to recent consumer gloom. The consensus forecast for the data later Friday is for a decline of 175,000 in October, a much smaller reduction than the nasty 263,000 fall registered in September.

However, with the latest private sector employment survey from ADP coming in much as expected and the unemployment subcomponent of the non-manufacturing Institute of Supply Management survey disappointing, economists are now expecting the downside risks for payrolls to grow.

Instead of predicting an improvement on last month, analysts at RBC Capital Markets are now forecasting a 300,000 fall--the sort of figures that will not only justify the Fed's reticence on exiting its easy monetary policy, but ensure that global risk appetite remains subdued and that the dollar gets another surge of safe-haven support.

Early Friday in Europe, the dollar was mixed as investors appeared eager to square positions ahead of payrolls. After an earlier rise in market sentiment as equities rallied, the market's mood appeared to be slumping again with investors pulling back from high-yielders.




At 0745 GMT, the dollar was down at Y90.49 from Y90.75 late on Thursday in New York, according to EBS.
The euro was nearly flat at $1.4871, compared with $1.4875, but down at Y134.63 from Y135.00.