Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Dollar slides after slowing U.S. jobs growth in July

Published 08/03/2023, 10:30 PM
Updated 08/04/2023, 04:41 PM
© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Herbert Lash

NEW YORK (Reuters) - The dollar fell on Friday, paring almost all the week's gains, after slowing U.S. 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 U.S. 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.

Downward revisions 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.

"There's a short squeeze in the foreign currencies, a bit of a long-dollar liquidation encouraged by a sharp drop in interest rates," he said. "The dollar's upside correction is almost over."

Chandler said next week's Consumer Price Index (CPI) report could show the first year-over-year rise in inflation since June 2022.

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.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

"The case is still for a soft landing at worst," Lien said. "But all of today's data leaves the door open for another rate hike from the Federal Reserve."

The dollar index, a measure of the U.S. currency against six peers, fell 0.4% after climbing on Thursday to 102.84, the highest since July 7. The decline was the dollar's biggest single-day loss in three weeks.

The U.S. labor market is trending in the right direction, said Marvin Loh, senior global macro strategist at State Street (NYSE:STT) in Boston.

"Like a lot of the data we've gotten of late, there are things for the bulls and there are things for the bears," he said.

Slowing jobs growth puts the economy closer to "that magical 100,000 to 120,000 (jobs) per month creation number" that Fed Chair Jerome Powell would like to see, Loh said.

But "wages picked up. We're now running at 4.4% average hourly earnings year over year. That's still inconsistent with the Fed's 2% goal," he said.

The euro gained 0.55% to $1.1004 and the Japanese yen strengthened 0.51% at 141.81 per dollar.

Long-term U.S. 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. [US/]

The yen has been sensitive to higher U.S. 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. [JP/]

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

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. [AUD/]

The Aussie rose 0.18% versus the greenback to $0.656.

The Swiss franc, the G10 currency that has gained the most against the dollar this year, reversed declines after the jobs data. The dollar fell 0.11% against the franc.

Sterling was last trading at $1.2742, up 0.23% on the day.

Currency bid prices at 4:00 p.m. ET (2000 GMT)

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

Previous Change

Session

Dollar index 102.0200 102.4500 -0.40% -1.420% +102.6200 +101.7300

Euro/Dollar $1.1006 $1.0950 +0.52% +2.72% +$1.1042 +$1.0935

Dollar/Yen 141.8100 142.5200 -0.49% +8.17% +142.8750 +141.5500

Euro/Yen 156.07 156.04 +0.02% +11.24% +156.6300 +155.9100

Dollar/Swiss 0.8731 0.8742 -0.09% -5.54% +0.8782 +0.8700

Sterling/Dollar $1.2743 $1.2709 +0.26% +5.37% +$1.2792 +$1.2689

Dollar/Canadian 1.3384 1.3353 +0.25% -1.20% +1.3394 +1.3320

Aussie/Dollar $0.6566 $0.6549 +0.25% -3.68% +$0.6609 +$0.6542

Euro/Swiss 0.9608 0.9570 +0.40% -2.90% +0.9623 +0.9570

Euro/Sterling 0.8635 0.8613 +0.26% -2.36% +0.8647 +0.8602

NZ $0.6091 $0.6077 +0.21% -4.09% +$0.6133 +$0.6072

Dollar/Dollar

Dollar/Norway 10.1360 10.2440 -1.26% +3.07% +10.2380 +10.0850

Euro/Norway 11.1578 11.2221 -0.57% +6.33% +11.2469 +11.1264

Dollar/Sweden 10.5784 10.6988 -0.45% +1.63% +10.7203 +10.5370

Euro/Sweden 11.6424 11.6945 -0.45% +4.42% +11.7325 +11.6290

Latest comments

Wage growth is going to keep inflation elevated.....FED will have to raise again
lanjiao la dollar
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.