The US dollar fell to a two-week low after US payrolls rose less than forecast and wages stagnated, reducing the case for the US Federal Reserve to raise interest rates for the first time in almost a decade.
The Bloomberg Dollar Spot Index declined after a US Department of Labor report showed the economy added 142,000 jobs last month, trailing the forecast for 201,000.
Futures prices showed the US central bank is unlikely to increase interest rates until next year. Haven currencies including the euro and the yen strengthened amid concern the US is not immune to global economic headwinds.
“Anything that removes or pushes out Fed tightening is going to weigh on the dollar,” said Roger Bayston, senior vice president and director of fixed income at the Franklin Templeton Investments fixed-income group in San Mateo, California. “The currency picture going forward is really going to be determined by whether we see any stabilization in growth in some of these global economies.”
The dollar gauge fell 0.3 percent to 1,208.32 as of 2:51pm in New York, after earlier touching its lowest level since Sept. 18. The US currency dropped 0.3 percent to US$1.1226 per euro and was little changed at ¥119.89.
“The US dollar is getting smacked versus the Japanese yen and euro,” Bank of Nova Scotia chief foreign-exchange strategist Shaun Osborne wrote in an e-mail.
The news buoyed refuge currencies, with the Swiss franc, the yen and the euro among those leading the charge against the dollar. The European Central Bank and the Bank of Japan are engaged in unprecedented attempts at monetary stimulus designed to boost employment and price gains.
Falling oil prices, political unrest and an ongoing rout in commodities caused emerging-market currencies to trail their G10 counterparts this year. The Brazilian real has depreciated about 33 percent against the dollar since January.
“Bad news is bad news, we’re seeing it for currency markets, the dollar is weaker in the Group of Three, against the euro and yen, and until risk sentiment recovers, I think emerging markets will be on the sidelines,” London-based Saxo Bank AS head of foreign-exchange strategy John Hardy said.
Last month’s jobs gain followed a revised 136,000 gain the prior month that was lower than previously estimated. The jobless rate held at 5.1 percent and wage growth was unchanged.
Average hourly earnings were unchanged from August, the report showed. They increased 2.2 percent during the 12 months ended last month, the same year-on-year change as in August. They have posted a 2 percent gain on average since the current expansion began in mid-2009.
“It’s hard to get behind the dollar following a report like this,” Washington-based Commonwealth Foreign Exchange chief market analyst Omer Esiner said. “It’s not just a headline miss, but really there’s weakness across all facets of this report.”
Traders see a 34 percent probability that the Fed raises rates by the December meeting, down from 58 percent a month ago, according to futures data compiled by Bloomberg. The calculation is based on the assumption that the effective Fed funds rate will average 0.375 percent after liftoff.
The dollar has surged about 15.4 percent in the past year, making it the best performer among 10 developed-nation peers, according to Bloomberg Correlation-Weighted Currency Indices. It fell against the yen and euro in the past three months as the Fed kept interest rates near zero amid concern about Chinese economic growth.
The British pound rebounded from a five-month low against the dollar. Sterling posted a weekly decline versus the euro as investors bet a delay by US policymakers would keep the Bank of England’s key rate at a record low for longer.
UK government bonds climbed, pushing the 10-year gilt yield to a five-month low.
“This was a soft US report in all respects and the pound has justifiably strengthened against a generally retreating dollar,” HSBC Holdings PLC foreign-exchange strategy head Daragh Maher said in New York. “It has not capitalized as much as others, notably the euro and the yen, and I suspect this reflects the difficulties sterling has faced recently alongside retreating UK rate-hike expectations.”
The pound rose 0.6 percent to US$1.5221 as of 4:32pm in London after slumping to US$1.5108 on Thursday, which matched the lowest level since May. Sterling was little changed at 74.05 pence per euro, leaving it 0.3 percent weaker from Sept. 25.
Benchmark 10-year gilt yields dropped four basis points, or 0.04 percentage points, to 1.70 percent, after touching 1.65 percent, the lowest since April 27.
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