The dollar struggled on Monday after failing to gain on stronger-than-expected US payrolls data, while the Australian dollar fell prey to profit-taking after its best weekly performance in more than four years. The greenback had initially gained on Friday in a knee-jerk reaction to an upbeat nonfarm payrolls report which showed solid job growth of 242,000.
But the dollar went into reverse as markets appeared to latch onto a disappointing fall in hourly earnings. While the robust payrolls report raised prospects of the Federal Reserve hiking interest rates this year, the decline in earnings helped temper such hopes. The dollar was down 0.2 percent at 113.605 yen after rising briefly to 114.25 on Friday following the employment report release. The US currency had sunk to a 16-month low below 111 yen last month as a global downturn in stocks amid Chinese growth woes and sliding commodities drove demand for the safe-haven yen.
"The dollar did not gain much against the yen on the non-farm jobs report mainly due to the tepid response by equities. The currency pair continues to be driven mainly by risk sentiment," said Shusuke Yamada, chief Japan FX strategist at Bank of America Merrill Lynch in Tokyo. Wall Street shares did gain Friday but the rise was modest, with the Dow adding 0.4 percent and the S&P 500 climbing 0.3 percent. Japan's Nikkei slipped 0.4 percent on Monday. "Those long on the yen are not in haste to unwind them on fears that the currency could gain further, with the Bank of Japan seemingly running out of options to prevent the yen from appreciating," Yamada at Bank of America Merrill Lynch said.
The BOJ adopted negative interest rates in January, but the shock move did little to weaken the yen. Speculators pushed net long positions on the yen to their highest in eight years, according to data from the Commodity Futures Trading Commission on Friday. The dollar index was steady at 97.339, nursing a 0.3 percent fall on Friday. It popped above 98.000 in immediate reaction to the jobs data, but then slid as deep as 97.019.
The broad dollar retreat helped drive the euro back up to the $1.1000 area, even though the European Central Bank (ECB) is widely expected to ease at its policy meeting on Thursday. Euro bears are tempering their expectations for bold action, having been disappointed before. The common currency was down 0.2 percent at $1.0992. The euro fetched 124.98 not far from a two-week peak of 125.585 scaled on Friday. The Aussie eased 0.4 percent to $0.7413, trimming some of last week's eye-catching 4.4 percent rally. It had easily outperformed on data showing an unexpected acceleration in the Australian economy, which reduced the chances of further cuts in interest rates this year.
Not helping, China on Saturday acknowledged it faces a tough battle to keep its economy growing by at least 6.5 percent over the next five years. "AUD/USD eased modestly in early thin Asian trading following the weekend commencement of China's National People's Congress (NPC). There have been no major positive surprises from the NPC so far," Commonwealth Bank currency strategist Joseph Capurso wrote in a note to clients, referring to China's 12-day annual national parliament.
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