Dol­lar weak as jobs re­port dis­ap­points

The Daily Star (Lebanon) - - BUSINESS -

NEW YORK: The dol­lar weak­ened against ma­jor currencies Fri­day af­ter data showed U.S. em­ploy­ers hired fewer work­ers than fore­cast in Novem­ber, back­ing the view that the U.S. growth is mod­er­at­ing and the Fed­eral Re­serve may even stop raising in­ter­est rates sooner than pre­vi­ously thought.

Non­farm pay­rolls in­creased by 155,000 jobs last month, while the un­em­ploy­ment rate was un­changed at near a 49-year low of 3.7 per­cent. Economists polled by Reuters had fore­cast pay­rolls in­creas­ing by 200,000 jobs in Novem­ber.

Av­er­age hourly earn­ings rose 0.2 per­cent in Novem­ber af­ter gain­ing 0.1 per­cent in Oc­to­ber. That left the an­nual in­crease in wages at 3.1 per­cent, match­ing Oc­to­ber’s jump, which was the big­gest gain since April 2009.

Fed pol­i­cy­mak­ers are still widely ex­pected to raise in­ter­est rates again at their Dec. 18-19 meet­ing, but the fo­cus is on how many rate hikes will fol­low in 2019.

“This was slightly dis­ap­point­ing on the head­line level, but wage growth com­ing in as ex­pected keeps the Fed on track to raise rates in De­cem­ber,” said Karl Schamotta, chief mar­ket strate­gist at Cam­bridge Global Pay­ments in Toronto.

“The over­all ef­fect has been a sell-off in the dol­lar, largely in a re­ac­tion to a lower ex­pec­ta­tion for rate hikes in 2019,” he said.

An in­dex that tracks the green­back ver­sus the euro, yen, ster­ling and three other currencies was down 0.08 per­cent at 96.735.

In­ter­est rate fu­tures im­plied traders see no more than one rate in­crease in 2019, com­pared with ex­pec­ta­tions a month ear­lier for pos­si­bly two rate hikes, ac­cord­ing to CME Group’s FedWatch pro­gram.

“While the mar­ket re­mains volatile, this could be the cat­a­lyst that sparks a re­treat in dol­lar strength as ex­pec­ta­tions for the Fed to con­tinue its cur­rent rate of pol­icy tight­en­ing fade,” Sam Cooper, vice pres­i­dent of mar­ket risk solutions at Sil­i­con Val­ley Bank, said in a note.

Fed­eral Re­serve Chair­man Jerome Pow­ell said ear­lier last week that U.S. in­ter­est rates were near­ing neu­tral lev­els, which mar­kets in­ter­preted as sig­nal­ing a slow­down in rate rises.

Fall­ing U.S. yields, which have been chip­ping away at the yield dif­fer­en­tial ad­van­tage the green­back en­joyed ear­lier this year, have been an­other fac­tor im­ped­ing the dol­lar’s ad­vance re­cently.

On a weekly ba­sis, the dol­lar was down 0.6 per­cent, set for its big­gest drop in more than two months.

Ster­ling in turn fell Fri­day and was headed for a fourth con­sec­u­tive week of losses as Bri­tish Prime Minister Theresa May pressed ahead with al­ready set plans for a par­lia­men­tary vote on her Brexit deal with the Euro­pean Union, de­spite sev­eral warn­ings such move could top­ple her gov­ern­ment.

The Cana­dian dol­lar strength­ened against its U.S. coun­ter­part as higher oil prices and data show­ing a record in­crease in do­mes­tic jobs bol­stered ex­pec­ta­tions for fur­ther in­ter­est rate hikes from the Bank of Canada. –

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