NEW YORK: The dollar fell on Friday, paring almost all the week’s gains, after slowing US jobs growth in July encouraged hopes of a soft economic landing but higher wages suggested the Federal Reserve may need to keep interest rates higher for longer.
The US economy added fewer jobs than expected last month. However, solid wage gains and a drop in unemployment to 3.5% signaled continued tightness in the labor market.
Nonfarm payrolls increased by 187,000 jobs last month, the Labor Department’s survey of households showed, less than a Reuters’ survey of economists who forecast growth of 200,000.
Revisions lower in May and June job growth suggested demand for labor was slowing after the Fed’s hefty rate hikes. But with 1.6 job openings for every unemployed person, the moderation in hiring might indicate companies are failing to find workers.
The softer-than-expected jobs number halted this week’s surge in Treasury yields and stopped the dollar’s recent climb, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
The market was positioned for a blowout number after a private payrolls report and still-low jobless claims data earlier this week, said Kathy Lien, managing editor of 60 Second Investor in New York.
The dollar index, a measure of the US currency against six peers, fell 0.459% after climbing on Thursday to 102.84, the highest since July 7. The decline was poised to be the dollar’s biggest single-day loss in three weeks.
The US labor market is trending in the right direction, with two consecutive monthly (jobs) prints after the revision for June now below 200,000, said Marvin Loh, senior global macro strategist at State Street in Boston.
The euro gained 0.62% to $1.1012 and the Japanese yen strengthened 0.50% at 141.85 per dollar.
Long-term US Treasury yields hit nine-month highs on Thursday, on the back of a deluge of supply as well as data pointing to further resilience in the labor market.
The yen has been sensitive to higher US yields as the Bank of Japan keeps local rates pinned down. After the BoJ’s surprise monetary policy tweak last week, traders are trying to gauge how fast and how high it will let yields rise.
The Australian dollar was buoyed - in addition to dollar weakness - by the end of Chinese anti-dumping and anti-subsidy tariffs on Australian barley imports as the trade partners repair strained ties.
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