Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Dollar falls after weak services data

Published 06/04/2023, 11:01 PM
Updated 06/05/2023, 03:42 PM
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

By Karen Brettell

NEW YORK (Reuters) - The dollar fell on Monday on news that the U.S. services sector barely grew in May as new orders slowed, ending an initial rally sparked by strong jobs growth.

The Institute for Supply Management (ISM) said its non-manufacturing PMI fell to 50.3 last month from 51.9 in April. A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy.

Economists polled by Reuters had forecast the non-manufacturing PMI edging up to 52.2.

The data indicates that the more accurate signal from the jobs report "might have been from the uptick in the unemployment rate rather than the solid increase in payroll employment," Bill Adams, chief economist for Comerica (NYSE:CMA) Bank said in a note.

Data on Friday showed U.S. job growth accelerated by 339,000 jobs in May, but a surge in the unemployment to a seven-month high of 3.7% suggested an easing labor market.

The dollar had risen after the better-than-expected jobs gains boosted expectations the Federal Reserve may continue hiking rates as inflation remains elevated.

"Job gains continue to surprise meaningfully to the top side, the labor market continues to be very strong," said Brian Daingerfield, head of G10 FX strategy at NatWest Markets in Stamford, Connecticut.

The dollar index fell to 104.00, down 0.13% on the day, after climbing as high as 104.40. It is holding just below a 11-week high of 104.70 reached on May 31.

The euro was last up 0.07% at $1.0712, just above $1.0635 on May 31, which was the lowest since March 20.

The greenback fell 0.27% to 139.60 yen. It reached 140.93 on May 30, the highest since Nov. 23.

The U.S. central bank is viewed as most likely to leave rates unchanged in June, but fed funds futures traders are pricing in a 65% likelihood of at least an additional 25 basis points rate hike by July, according to the CME Group's (NASDAQ:CME) FedWatch tool.

Fed officials including vice chair nominee Philip Jefferson have stressed that any Fed decision to hold its benchmark overnight interest rate steady at an upcoming meeting should not be taken to mean the U.S. central bank is done tightening monetary policy.

"You could think of a skip as maybe part of the slowing of the tightening cycle rather than a pause in the tightening cycle," said Daingerfield.

Fed officials are now in a blackout period before the June 13-14 meeting. Consumer price inflation data for May due on June 13 is the next major U.S. economic release.

The Aussie dollar edged higher before the Reserve Bank of Australia (RBA) is due to announce its interest rate decision on Tuesday.

Wells Fargo (NYSE:WFC) analysts Erik Nelson and Jack Boswell on Monday recommended buying the Australian currency against the U.S. dollar and British pound on the view that markets are underestimating the likelihood of a rate hike.

"Market pricing for the RBA looks far too low in our view, both outright and relative to peers," they said. "We expect the RBA to hike tomorrow and guide for more, leading to a ~25-bp upgrade to terminal rate pricing and a sharp AUD rally."

========================================================

Currency bid prices at 3:01PM (1901 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 104.0000 104.1500 -0.13% 0.493% +104.4000 +103.9300

Euro/Dollar $1.0712 $1.0708 +0.07% +0.00% +$1.0722 +$1.0675

Dollar/Yen 139.6000 139.9800 -0.27% +6.48% +140.4450 +139.2500

Euro/Yen 149.53 149.87 -0.23% +6.59% +150.1900 +149.2400

Dollar/Swiss 0.9057 0.9090 -0.37% -2.06% +0.9119 +0.9053

Sterling/Dollar $1.2432 $1.2450 -0.12% +2.82% +$1.2447 +$1.2370

Dollar/Canadian 1.3437 1.3435 +0.03% -0.82% +1.3461 +1.3418

Aussie/Dollar $0.6616 $0.6605 +0.16% -2.95% +$0.6637 +$0.6580

Euro/Swiss 0.9700 0.9732 -0.33% -1.97% +0.9751 +0.9697

Euro/Sterling 0.8615 0.8598 +0.20% -2.59% +0.8636 +0.8598

NZ $0.6072 $0.6057 +0.30% -4.32% +$0.6085 +$0.6044

Dollar/Dollar

Dollar/Norway 11.0350 11.0260 +0.05% +12.40% +11.0990 +11.0170

Euro/Norway 11.8190 11.7854 +0.29% +12.68% +11.8540 +11.7520

© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

Dollar/Sweden 10.8544 10.7884 +0.64% +4.29% +10.9171 +10.7986

Euro/Sweden 11.6293 11.5548 +0.64% +4.30% +11.6585 +11.5707

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.