Safe-haven yen, dollar firm with markets on edge before US payrolls test

By Kevin Buckland

TOKYO (Reuters) – The safe-haven Japanese yen and U.S. dollar remained firm on Wednesday while riskier currencies like sterling and the Aussie dollar languished as investors ran for safety following the worst sell-off in almost a month on Wall Street.

The catalyst was ostensibly some soft U.S. manufacturing data, which fanned worries about a hard landing for the economy, as traders braced for crucial monthly payrolls data on Friday.

The yen was about 0.1% stronger at 145.325 per dollar early in Asia’s day (2249 GMT) following a 1% rally overnight against a broadly stronger dollar.

The U.S. currency was flat at $1.1046 per euro after gaining 0.26% on Tuesday, and was steady at $1.3111 versus sterling after a 0.23% rise.

The Aussie was little changed at $0.67135 after Tuesday’s 1.2% tumble.

Risks to the soft-landing scenario that had been gaining traction recently in markets saw traders raise odds of a 50 basis point (bp) Federal Reserve interest rate cut on Sept. 18 to 38% from 30% a day earlier, according to the CME Group’s (NASDAQ:CME) FedWatch Tool.

“Markets are nervous ahead of Friday’s very important non-farm payroll report, … which most market participants acknowledge will be a significant factor at the very least in whether the Fed cuts by 25 or 50,” said Gavin Friend, senior markets strategist at National Australia Bank (OTC:NABZY).

“All those asset moves point to a risk-off view and a bias for safe havens, (with investors) stepping back a bit.”

A gauge of U.S. manufacturing edged up last month from an eight-month low in July amid improvement in employment, but the overall trend continued to point to subdued factory activity, Tuesday’s data showed.

Economists surveyed by Reuters expect Friday’s report to show an increase of 165,000 U.S. jobs in August, up from a rise of 114,000 in July.

Ahead of that, job openings data on Wednesday and the jobless claims report on Thursday will be in the spotlight.