The dollar nursed losses on Monday, falling around 0.4 percent against the euro and easing against a basket of currencies, after a weak U.S. jobs report drove traders to push back expectations of a Federal Reserve rate hike to early 2016.
The euro’s bounce, though, is likely to remain muted, with the European Central Bank likely to come under additional pressure to ease monetary policy in a bid to neutralize the impact on inflation from a firmer currency.
The dollar index .DXY, which tracks the greenback against a basket of six major currencies, slid to 95.218 on Friday, its lowest since Sept. 21. It last stood at 95.622, down 0.2 percent from Friday’s late U.S. trade.
The euro was up at $1.1255 EUR=, drawing some support from the weekend elections in Portugal where results produced no surprises. The dollar was marginally higher against the yen at 120.05 yen JPY=, moving away from Friday’s low of 118.68 yen, its lowest since Sept. 7.
“The U.S. jobs data was a disappointment and postpones expectations of a lift-off by the end of this year which is not dollar positive,” said Yujiro Goto, currency strategist at Normura.
“At the same time, we expect the other major central banks like the Bank of Japan and the ECB to remain dovish. So the euro’s rise above $1.13 could be capped, while dollar/yen is likely to be supported at 120 yen.”
The U.S. nonfarm payrolls report showed employers added only 142,000 jobs last month, falling far short of economists’ consensus expectation for a rise of 203,000 jobs, according to a Reuters poll. Moreover, the August figures were revised sharply lower while wages remained muted.
That raised doubts whether the U.S. economy was strong enough to justify the Fed’s long-awaited interest rate increase, which would be the first since 2006.
While the Fed is still expected to be the first major central bank to raise rates in the near future, uncertainty about the timing of this hike has kept the dollar locked in ranges.
In contrast with the Fed, some investors believe the Bank of Japan could unveil more easing steps perhaps as early as the conclusion of its next policy meeting on Wednesday, which has curbed the yen’s upside.
“Deteriorating growth and weakening inflation outlook in Japan increased the pressure for the BOJ to act early,” strategists at Barclays said in a note to clients, adding they now expect Japan’s central bank to take additional stimulus steps at its Oct 30 meeting.
Source: Reuters
