Dollar Weakens as Payrolls Below Forecast Fuel Growth Concern

The dollar fell to a three-week low after U.S. employers added fewer jobs than forecast last month, raising speculation the Federal Reserve may slow the pace of reduction in bond buying amid signs of uneven economic growth.

The greenback weakened against most of its 16 major peers as payrolls grew by 113,000 in January, versus the median forecast in a Bloomberg News survey for a 180,000 advance. The euro fell earlier as Germany’s top court questioned a rescue plan for debt crisis-hit euro-area nations and asked Europe’s highest judges to rule on its legality. Emerging-market currencies rose for a fourth day, and were poised for the biggest weekly advance since September.

“There’s some initial selloff in the dollar, downside may prove limited as I don’t think it’s weak enough to alter the Fed’s monetary policy,” Omer Esiner, chief market analyst in Washington at the currency brokerage Commonwealth Foreign Exchange Inc. , said in a phone interview. “The number is bad, but not a disaster number. There’ll be plenty of room for why it came under expectation, such as the weather.”

The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, fell 0.2 percent to 1,023.74, at 9:07 a.m. New York time, touching the lowest level since Jan. 14.

The dollar fell 0.1 percent to 102.16 yen. It rose 0.1 percent to $1.3581 per euro. The 18-nation euro was little changed at 138.80 yen.

Emerging Markets

A Bloomberg customized gauge tracking 20 emerging-market currencies rose 1 percent this week. It has fallen 2.1 percent this year.

The dollar suffered the biggest two-day loss against the yen since August after data on Jan. 10 showed December payrolls gained by the smallest since in three years. The greenback added 2 percent to 102.67 yen in the two days ended Jan. 13.

The Fed said Jan. 29 it would further trim its monthly bond purchases to $65 billion starting in February from $75 billion in January, based on optimism that economic growth is improving.

The job market indicators have been “mixed but on balance showed further improvement,” the Federal Open Market Committee (FDTR) said in a statement after the two-day meeting. “The unemployment rate declined but remains elevated,” the FOMC said.

Weather Report

Economists’ forecasts for the January report varied based on their assumptions for effects such as the inclement weather and the expiration of emergency unemployment benefits.

“If you look at the totality of the report, it’s weak, but we can explain some of it with the weather -- dollar-yen is down, but it’s not down that much,” said Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal, in a phone interview. “Looks like the Fed guys have set the course and it’s going to take a lot for them to change the course of taper, and this is not it.”

The euro weakened as the European Court of Justice has been asked to rule on a claim that the region’s central bank overstepped its powers in announcing the Outright Monetary Transactions in September 2012. The still-unused program allows the ECB to buy bonds of indebted nations and has been credited with helping to calm record borrowing costs.

The shared currency rose the most in two weeks yesterday after the ECB refrained after its policy meeting from introducing additional stimulus that tends to debase the currency. Central bank President Mario Draghi said officials could take action to counter low inflation when more data is available. The ECB will publish quarterly macro-economic forecasts next month.

Canada’s currency rose against its U.S. peer as the nation added 28,400 jobs in January after declining the prior month. The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.7 percent to C$1.992.

To contact the reporter on this story: Andrea Wong in New York at awong268@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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