Foreign-exchange traders, hoping to head off for the Labor Day weekend with a clear picture of how US Federal Reserve policy will influence the US dollar, were left scratching their heads on Friday.
The greenback slumped and then rebounded after the US Department of Labor reported that last month’s jobs growth and wage gains were weaker than projected. Futures showed the likelihood of a September interest-rate increase at 32 percent, after it fell to as low as 20 percent, and 60 percent by December.
The Fed rate calculation is based on the assumption that the effective fed funds rate will trade at the middle of the new Federal Open Market Committee target range after the increase.
“The jobs report didn’t meaningfully alter the dollar’s outlook because December has been the base case all along,” said Joe Manimbo, an analyst with Western Union Business Solutions, a unit of Western Union Co, in Washington. “There’s still interest rate uncertainty, and once the Fed moves, it’s not expected to go in rapid-fire succession.”
A gauge of the US currency shows it virtually unchanged from its six-week average, as traders seek to assess whether recent gains reflect a trend toward wiping out a loss through the first two-thirds of the year.
Much of the outlook hinges on Fed policy and whether US dollar-denominated assets will gain allure compared with securities issued in European or Asian currencies where central bankers continue aggressive stimulus that tends to weaken demand.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed as of 5pm in New York and posted its second straight weekly gain.
The index stood at 1,184.44, compared with its average of 1,183.12 since July 15. The greenback has added 1.5 percent the past two weeks to US$1.1156 per euro and 3.7 percent to ¥103.92.
The government’s report showed nonfarm employment climbed by 151,000 last month, compared with a median forecast of 180,000 in a Bloomberg survey.
TAIPEI
In Taipei, the US dollar fell against the New Taiwan dollar on Friday, shedding NT$0.033 to close at NT$31.703 after the US reported weaker manufacturing activity, hurting the greenback. However, it was slightly higher compared with NT$31.672 a week ago.
Foreign institutional investor buying of local equities put further pressure on the US dollar in a session that saw only moderate turnover ahead of the release of US jobs data later in the day, dealers said.
The US Institute for Supply Management’s manufacturing index for last month came in at 49.4, the weakest level since January. A reading above 50 reflects expansion, while a number below 50 shows contraction.
The data led currency traders in the region to question the strength of the US economy and consequently push regional currencies higher, signaling to traders here that they should buy into the Taiwan dollar, dealers said.
POUND RALLY
The pound posted its longest winning run since the UK shocked financial markets by deciding to leave the EU, but the rally failed to shake strategists, who expect a slide to its weakest level in three decades.
While sterling completed a third weekly gain versus the US dollar after reports pointed to resilience in the UK economy, the median of analysts’ forecasts compiled by Bloomberg remained unchanged at US$1.27.
That represents an almost 5 percent drop to levels not seen since 1985, while some banks, including Royal Bank of Canada and HSBC Holdings PLCc, expect the pound to slide by about twice that much.
The pound rose 1.2 percent this week to US$1.3297 as of 5pm in London on Friday, after touching US$1.3352, the highest since Aug. 3. Its three-week winning run is the longest since April 29. Sterling appreciated 1.6 percent to £0.8391 per euro, matching last week’s gain.
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