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By Bloomberg

A gauge of the dollar was near the highest in more than four months before U.S. jobs data on Friday that may bolster bets the Federal Reserve will raise interest rates next month.

The Bloomberg Dollar Spot Index held onto a weekly gain after a report on Thursday showed filings for U.S. unemployment benefits hovered near the lowest level in four decades. Australia’s dollar extended a second weekly advance after its central bank indicated unemployment had peaked.

“Markets are wary of jobs undershooting expectations, but any downside should be limited as there will be another U.S. report in September,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “Today’s data alone isn’t sufficient to nail down the timing, but it will be used to make a case for a September rate hike when you get the August numbers.”

The Bloomberg index that tracks the greenback against major peers was little changed at 1,216.01 as of 6:46 a.m. in London, after touching the highest since March 16 on Thursday. The gauge is set for a 0.6 percent gain this week.

The yen was at 124.79 per dollar from 124.74 in New York. It fell to 125.01 on Wednesday, the weakest since June 8.

The Aussie climbed 0.3 percent to 73.64 U.S. cents after the Reserve Bank of Australia said in its quarterly update of economic growth and inflation forecasts that the “unemployment rate is now forecast to remain little changed over the next 18 months or so.” The currency is the best performer among the greenback’s 16 major peers this week with a 0.7 percent gain.

End of Easing?

“It would signal that the RBA’s easing cycle is finished, because there’s no need for them to keep cutting rates if unemployment isn’t going up,” said Richard Grace, chief currency and rates strategist and head of international economics at Commonwealth Bank of Australia in Sydney.

“In the short term, this could be enough to see the Australian dollar lift up toward 75 cents over the next week or so,” although that could be scuppered by a strong U.S. payrolls report, he said.

Pressure to further stimulate the economy has been relieved by a better labor market and a weaker currency, allowing RBA Governor Glenn Stevens in his policy decision Tuesday to omit a reference to the local dollar being too high for the first time in 18 months. The central bank has kept interest rates at a record-low 2 percent since May.

Milk Prices

New Zealand’s dollar hit a low of 65.29 U.S. cents before reversing losses to 65.64, up 0.2 percent from New York after Fonterra Cooperative Group cut its forecast for farmgate milk prices and said it was hard to call when the dairy market will improve.

U.S. jobless claims rose by 3,000 to 270,000 in the week ended Aug. 1. Friday’s jobs report will show employers, including government agencies, took on 225,000 workers last month, while the jobless rate held at a seven-year low of 5.3 percent, according to Bloomberg surveys of economists.

The dollar’s momentum will be lost above 125.50 yen unless nonfarm payrolls increase by more than 250,000, Takeru Kurokawa, an analyst in Tokyo at Ueda Harlow Ltd., which provides margin- trading services, wrote in a note to clients. It may drop to 124 if the figure is below 200,000, he said.

“I think the downside risk is high,” Kurokawa wrote.