By Omer Esiner of Travelex

The dollar put in a mixed performance overnight, falling back toward this week's lows against the euro and pound but firming toward a three-month peak against the broadly weaker yen.

Investors flattened out positions in the single currency ahead of a key private-sector jobs report in the U.S. today. Month-end and quarter-end positioning also prompted the greenback to give up some of its recent gains against the euro and the British pound.

The yen suffered after a string of generally solid U.S. economic news raised the risk that the Fed may may raise rates sooner than previously expected. Higher U.S. borrowing costs leave the yen vulnerable to becoming the market's favorite funding vehicle for trades in higher-yielding assets. The winding down of fiscal-year end capital repatriation in Japan also added to the yen's broadly heavier tone.

USD: ADP ( ADP), which publishes a closely watched private-sector jobs report, this morning reported a loss of 23,000 jobs in March, confounding expectations for an increase of 40,000.

Although the data dampened some of the market's optimism ahead of the government's employment report on Friday, it may not be a very good indicator. ADP claims February's figures were not influenced by winter weather and that March did not include the addition of temporary census workers. Consequently, Friday's government report could still show strong U.S. jobs growth.

JPY: The yen fell to a three-month trough against the greenback, a 17-month low against the Canadian dollar and near a two-month low against the euro.

The yen has suffered from some good U.S. economic news this week, including yesterday's upside surprise to consumer confidence. This has added to investors' optimism about an improving U.S. recovery that could ultimately prompt the Fed to begin normalizing lending rates sooner that previously expected.

Positioning ahead of Friday's U.S. employment data, which could significantly add to expectations for tighter Fed policy, also undermined the yen. With the Japanese central bank's overnight rate at just 0.1%, the yen remains vulnerable to moves higher in U.S. yields, which make funding carry trades by selling the dollar slightly more expensive.

The winding down of capital repatriation ahead of today's fiscal year-end in Japan prompted may firms and individuals to take advance of rising yields abroad as well. The yen remains vulnerable to continued losses as improving fundamentals in much of the world continue to contrast with very anemic growth in Japan and the fact that Japan's central bank is likely to lag most of its counterparts in monetary normalization.

EUR: The euro rose toward its highs for this week against the greenback and bounced further off a 30-month low against the Canadian dollar.

Profit-taking and position squaring added to the single currency's upside ahead of today's month- and quarter-end. Data overnight showed a rise in eurozone CPI in March to 1.5% year over year, vs. February's 0.9%. The March number marks the highest level of consumer inflation since December 2008.

Separate news showed that the unemployment rate in the 16-member bloc rose to 10.0%, its highest level since August 1998. The rise in price pressures is largely being attributed to higher commodity prices and very low baseline statistics from a year ago.

The data are not likely to alter the outlook for a steady European Central Bank for the foreseeable future. Consequently, the euro remains vulnerable to renewed sovereign concerns, which will ultimately keep its upside very limited in the months ahead. The first quarter of 2010 saw the euro give up more than 6% against the greenback and 9% against the Canadian dollar.

AUD: The Aussie gave up some of its recent gains against the greenback and Canadian dollar overnight after a disappointing retail sales report clouded the outlook for another quarter-point rate hike by Australia's central bank on Tuesday. Retail sales fell by 1.4% month over month in February, the biggest drop in a year, suggesting that the Reserve Bank of Australia's four interest rate hikes since last October may be dampening consumer demand.

CAD: Canadian GDP rose by 0.6% month over month in January, just above the 0.5% forecast. Nearly all sectors of the economy improved in January and added to the overall robust GDP reading. Gains in industrial and manufacturing activity, retail sales and real estate boosted growth and suggested an improving pace of recovery. The data add to speculation that Canada's central bank may begin to normalize rates as early as June and pushed the loonie to highs of the session.
Omer Esiner serves as the Senior Currency Market Analyst at Travelex, Inc. a global financial institution specializing in corporate foreign exchange services and international payment solutions. In this capacity, he monitors, analyzes and interprets the economic, financial, political and technical factors that drive the movements of more than 100 currencies for Travelex. Mr. Esiner explains the currency markets' reaction to market events to clients, employees and members of the media.

You can view his daily reports, recording briefings, and quarterly reviews posted here. As an expert in foreign exchange, Mr. Esiner is quoted regularly by the financial media including The Wall Street Journal, CNN, Dow Jones Newswires, Reuters, the Nightly Business Report, National Public Radio, among others. Based in Washington, D.C., Esiner joined Travelex in February 2000. Prior to his current position, Esiner was a currency trader for several years. Mr. Esiner holds a bachelor's degree in economics from the University of Maryland, College Park. He is fluent in Turkish and proficient in Spanish.