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By Bloomberg

Dollar bulls are looking to U.S. nonfarm payrolls on Friday to keep the currency from posting its first weekly decline since mid-May.

A gauge of the greenback snapped its worst two-day drop since March on Thursday after benchmark Treasury yields fell from eight-month highs and German bunds rose. The dollar was less than one yen from its strongest level since December 2002 against Japan’s currency as traders speculated on the timing of the first Federal Reserve interest-rate increase since 2006. The euro slid after Greece deferred a payment due to the International Monetary Fund on Friday.

“It’s unlikely that we’re going to see an outcome from payrolls that shifts Fed thinking” away from increasing rates this year, said Todd Elmer, a Singapore-based currency strategist at Citigroup Inc. “We’re still in a situation where the U.S. economy is set to outpace its peers, and the Fed is going to tighten policy before its peers, and that situation is going to drive the dollar higher.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major peers, was little changed at 1,184.12 as of 6:43 a.m. in London, following a 0.3 percent gain the day before. It lost 1.5 percent in the two days ended Wednesday, putting it on track for its first weekly drop since May 15.

The greenback rose 0.2 percent to $1.1217 per euro. It bought 124.45 yen from 124.36 in New York.

Employers in the U.S. probably added more than 200,000 jobs for the 14th time in 15 months in May, according to economists surveyed by Bloomberg. The labor market picture was clouded this year after 85,000 positions were added in March.

“Markets expect a strong number, so the dollar will naturally be bought if that’s the case,” said Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank Ltd. in New York.

Greece Defers

The dollar index held gains from Thursday after Greece became the first country to defer a payment to the IMF since the 1980s, delaying a debt payment of about $339 million due Friday and asking to bundle payments totaling about $1.7 billion due this month into one lump sum.

“The USD has lost a good deal of ground vs. European currencies but has held up better vs. the rest of the G10 and EM fx, suggesting that price action has had more to do with pressure on European fixed income markets than doubts over the outlook for the US currency,” Daniel Katzive and Vassili Serebriakov, foreign-exchange strategists at BNP Paribas SA, wrote in a note dated June 5. “However, USD bulls face a significant test with the release of the May jobs report.”