The dollar is set to notch broad weekly gains and could extend...

The dollar is set to notch broad weekly gains and could extend its rally if U.S. labour data due on Friday reinforces the case for early Federal Reserve interest rate hikes.

The yen has been the most prominent casualty in the first trading week of the year, as investors reckon the Bank of Japan is likely to lag most of all on rate hikes.

But firming expectations that the Fed could raise rates as soon as March and several times this year is pushing up U.S. yields and the currency.

The greenback hit a five-year peak on the yen at 116.35 on Tuesday and hovered around 115.87 JPY=EBS in Asia on Friday, where moves were slight ahead of jobs data at 1430 GMT.

It is up about 0.7% on the yen this week and about 2.7% over five weeks. The dollar is also eyeing its best week in more than a month against the Australian and New Zealand dollars.

The Aussie AUD=D3 fell through support around $0.7184 on Thursday and last bought $0.7159. It has lost 1.5% for the week so far. The kiwi NZD=D3 was near a two-week low at $0.6751 on Friday and down 1.4% for the first trading week of 2022.

The greenback is also up about 0.6% for the week to $1.1301 per euro EUR=EBS . It surged to a 17-month high on the South Korean won KRW=KFTC , though has eased a bit from Thursday's six-week peak against the offshore yuan CNH=D3 .

On Thursday, St. Louis Fed President James Bullard said the Fed could also start reducing its balance sheet soon after it begins hiking, and even dovish San Francisco Fed President Mary Daly said the balance sheet reduction would follow normalising rates.

Partial labour data on Wednesday beat market expectations by miles and a strong non-farm payrolls figure later on Friday, especially if it is bigger than the forecast 400,000 jobs added last month, could bolster the case for sooner hikes.

"If it is a very strong number the Fed has more fuel to maintain the hawkish rhetoric, which further supports the March hike probability," analysts at NatWest said in a note to clients, adding the downside is probably limited.

The U.S. dollar index =USD hovered at 96.206. Elsewhere, sterling GBP=D3 has held its own this week as traders figure the Bank of England will soon begin its own hiking path. It last bought $1.3545, not far from Tuesday's two-month high of $1.3599. It is near a two-year high on the euro.

The big moves in the U.S. bond market have unsettled traders' sentiment across asset classes, too, and cryptocurrencies have dropped sharply in holiday-thinned trade.

Bitcoin BTC=BTSP hit its lowest since September in Asia trade at $40,939. A break of support around $39,000 could leave it open to further losses, traders said. Ether ETH=BTSP was last down 5% at a three-month low of $3,245.

Rising Omicron cases are also causing jitters and in emerging markets the Thai baht nursed a Thursday slide after the country raised its virus alert level, foreshadowing tighter restrictions.

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	Currency bid prices at 0527 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.1302		$1.1300	 +0.02%		 -0.58%	  +1.1303	 +1.1290 
 Dollar/Yen		JPY=EBS	115.8900	   115.8500	+0.03%		 +0.76%	  +116.0400   +115.8900 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.9211		 0.9213	  -0.03%		 +0.98%	  +0.9217	 +0.9211 
 Sterling/Dollar   GBP=D3	 1.3545		 1.3536	  +0.06%		 +0.15%	  +1.3552	 +1.3528 
 Dollar/Canadian   CAD=D3	 1.2713		 1.2727	  -0.11%		 +0.55%	  +1.2730	 +1.2707 
 Aussie/Dollar	 AUD=D3	 0.7159		 0.7163	  -0.02%		 -1.48%	  +0.7177	 +0.7158 
 NZ				NZD=D3	 0.6751		 0.6747	  +0.09%		 -1.34%	  +0.6755	 +0.6740 
 Dollar/Dollar																				   

All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX

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World FX rates	https://tmsnrt.rs/2RBWI5E 

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