TOKYO (Reuters) – Asian stocks rose on Friday and the dollar hit a seven-week peak, riding on economic optimism ahead of a U.S. job report later in the day.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.3 percent, poised for a 1.6 percent gain on the week.
The S&P 500 .SPX posted its sixth straight record high close on Thursday, its longest run since 1997, as investors cheered increased prospects for a tax overhaul with Congress moving closer to agreement on a budget resolution. [.N]
“We have the very first step where Congress passed the budget details, so you’re one step nearer to tax reform,” said Heng Koon How, head of markets strategy for United Overseas Bank (UOB) in Singapore.
Data on Thursday showed the number of Americans filing for unemployment benefits fell more than expected, the trade deficit narrowing, and evidence of strong orders for core capital goods.
The latest boost in U.S. economic optimism lifted Treasury yields and helped take the dollar index against a basket of major currencies to the seven-week high.
U.S. data this week has been solid on the whole, with investor focus now turned to the closely-watched nonfarm payrolls report due at 1230 GMT.
Of key interest to the financial markets was how hurricanes Harvey and Irma may have affected the labour market in September.
“The hurricanes have made employment conditions difficult to pin down and market reaction could be limited regardless of how strong or weak the outcome is,” said Shin Kadota, senior strategist at Barclays in Tokyo.
Economists expect 90,000 new U.S. jobs were created in September, down from 156,000 in August, according to a Reuters poll.
“If the results are strong, it would enhance expectations for the Fed to raise interest rates in December. But whether expectations for rate hikes beyond December could be raised is another matter, with the Fed keeping a cautious stance on prices and with (Chair Janet) Yellen’s term ending in February,” Kadota at Barclays said.
Interest rate futures traders are now pricing in an 86 percent likelihood of a December rate hike, up from 78 percent a week ago, according to the CME Group’s FedWatch Tool.
The dollar index was 0.1 percent higher at 94.057 .DXY after rising to 94.112, its highest since Aug. 16.
The euro extended the previous day’s losses, falling to a two-month low of $1.1686 EUR=. It was on track to end 1 percent lower on the week.
The dollar added 0.15 percent to 112.990 yen JPY= to edge towards a two-month peak of 113.260 scaled last week.
The pound was particularly vulnerable against the bullish dollar after a poorly-received keynote speech by British Prime Minister Theresa May deepened market doubts about her ability to govern effectively. [GBP/]
Sterling retreated to a one-month low of $1.3073 GBP=D3 after sliding 1 percent overnight.
The Australian dollar was down 0.5 percent at $0.7753 after falling to as low as $0.7743 AUD=D4, its weakest since mid-July. The Aussie slid following media reports that Reserver Bank of Australia board member Ian Harper had said he is not ruling out an interest rate cut.
Falling bond prices pushed up the 10-year U.S. Treasury yield US10YT=RR to 2.353 percent, nudging it back towards a three-month high of 2.371 set on Monday. The yield had momentarily dropped to 2.300 percent mid-week.
In commodities, Brent crude LCOc1 was down 0.1 percent at $56.94 a barrel.
The futures contract had surged 2.1 percent overnight on signs Saudi Arabia and Russia would limit production through next year, although caution towards a tropical storm heading for the Gulf of Mexico cut short the advance. [O/R]
Reporting by Shinichi Saoshiro; Additional reporting by Masayuki Kitano in Singapore; Editing by Eric Meijer and Kim Coghill