NEW YORK: The dollar weakened on Friday, poised for multi-week losses against major currencies, as uncertainty surrounding a US government shutdown clouded the outlook and delayed key data releases — such as payrolls — critical for gauging the economy’s direction.
The US nonfarm payrolls report for September was due for release on Friday, but was not published due to the government closure.
The yen, on the other hand, pulled back from this week’s highs as traders mulled the Bank of Japan’s next move ahead of a ruling party leadership election this weekend.
In late morning trading, the euro rose 0.2 percent against the dollar to USD1.1739, headed for its best week in a month.
Gains in the euro pushed the dollar index, which measures the greenback against a basket of key currencies, 0.1 percent lower at 97.77. The index was on track for its worst weekly showing since July.
“The shutdown is basically extending concerns about the health of the US economy. We’re almost flying blindly here, and we don’t know,” said Jayati Bharadwaj, global FX strategist at TD Securities in New York.
“The longer the shutdown extends, people will start to get concerned about its impact on the economy. Already, there are concerns about people being let go, being furloughed, which is what the government has historically done, and all of that is just weighing on the dollar in the short term.”
Against the Swiss franc, the dollar fell 0.3 percent to 0.7953 francs . It was down 0.4 percent on the week, on pace for its worst weekly showing since mid-August.
The dollar also slid against sterling, which rose 0.2 percent to USD1.3470. The pound was on track for its largest weekly gain since August 11.
The US currency slightly extended its fall against major currencies after data showed US services sector activity stalled in September amid a sharp slowdown in new orders.
The ISM said its non-manufacturing purchasing managers’ index (PMI) fell to 50 last month, the breakeven level, from 52.0 in August. Economists polled by Reuters had forecast the services PMI easing to 51.7. The services sector accounts for more than two-thirds of US economic activity.
In other FX pairs, the dollar edged higher against the yen, up 0.1 percent at 147.44 yen having earlier fallen as much as 0.4 percent. It remained on track for a 1.4 percent advance this week that would be the biggest since mid-May.
BOJ Governor Kazuo Ueda struck a cautious tone in comments about the global economy, lowering expectations of an imminent rate hike. Markets were also focused on a Liberal Democratic Party election on Saturday that will determine Japan’s next prime minister.
“Market participants are a little bit disappointed potentially. ... He (Ueda) didn’t really lean into the idea of an October rate hike as much as some of his colleagues have done in recent sessions, that’s why we’ve seen a little bit of pressure on the yen,” said Michael Brown, senior research strategist at Pepperstone.
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