(Refiles to add dropped word ‘Greece’ in eighth paragraph)
* Dollar index hits 11-year high, jobs data next test
* Euro struggles, ECB to start bond buying next week
* Swiss franc reserves suggest SNB didn’t intervene in Feb
By Ahmed Aboulenein
LONDON, March 6 (Reuters) – The dollar hit an 11-1/2 year high against the euro on Friday, as interest rate differentials widened in favour of U.S. Treasuries with investors awaiting U.S. job data due later which could push the Federal Reserve towards hiking rates.
The gap between German and U.S. bond yields held near its widest for at least 25 years with the ECB’s money-printing programme just days away. The spread peaked at 1.79 percent in U.S. trading late on Thursday, according to Reuters data dating back to 1990.
Against a basket of major currencies the dollar hovered around 11-year highs, and dealers saw little prospect of further moves before the non-farm payroll numbers start the U.S. day at 1330 GMT.
The dollar index was 0.3 percent higher at 96.727 while the euro slumped to an 11-1/2 year low of $ 1.0963. The euro’s drop came as investors braced for the ECB’s 1 trillion euro bond buying programme which is expected to weaken the euro.
“The market is positioning itself ahead of Monday’s start to quantitative easing,” said Jane Foley, senior currency strategist at Rabobank in London.
“What we have now is what markets speculated about for quite some time which is a combination of more quantitative easing for the ECB and the market positioning itself for the start of a Federal Reserve hiking process.”
Foley said there was market optimism that non-farm payroll data could support the release of the word “patient” from the Federal Reserve statement later this month and potentially signal a June rate hike but that is not Rabobank’s view.
Traders said comments by the head of the euro zone’s rescue fund that Greece needs to pay back all the money it received from its euro zone partners rather than asking for debt relief also affected the move.
Attention was now firmly on the upcoming jobs data.
“We are dollar bulls but the dollar has done very well since the ISM services and ADP jobs figures on Wednesday so that raises the bar substantially for the numbers today to push the dollar higher,” said Michael Sneyd, a strategist with French bank BNP Paribas in London.
BNP expect U.S. employers to have added 250,000 jobs in February, compared to a consensus of 240,000, and Sneyd said a figure in line with that might not prove enough to push the dollar strongly past Thursday’s highs.
On other European markets, data from the Swiss central bank showed a rise in foreign currency reserves over the past month that strategists said should largely be accounted for by the change in the franc’s value, suggesting the Swiss National Bank has not been intervening heavily against the currency.
The franc has fallen back to around 1.07 francs per euro from less than 1 franc per euro just over a month ago, and there had been market speculation the SNB was intervening in the early days following its abandonment of a peg against the euro on Jan. 15. It traded 0.3 percent higher against the euro at 1.0715 on Friday.
(Additional reporting by Patrick Graham; Editing by Toby Chopra)
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