The dollar declined against most major counterparts amid heightened tensions in Ukraine and employment data that sent mixed signals on the strength of the U.S. expansion following a first-quarter slowdown.
The greenback initially reached a six-week high against a basket of peers after the Labor Department said employers boosted payrolls in April by the largest amount in two years and the jobless rate plunged. At the same time, the share of the working-age population either employed or seeking a job declined. A measure of market volatility rose from almost a seven-year low.
“There is still uncertainty around geopolitical risk in Ukraine and Russia,” said Richard Cochinos, the head of Americas Group of 10 currency strategy at Citigroup Inc. “With geopolitical issues still hanging over our heads, there is profit-taking.”
The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, dropped 0.1 percent to 1,007.72 at 5 p.m. New York time after gaining as much as 0.4 percent, the most since March 19.
The dollar fell 0.1 percent to 102.20 yen after touching 103.02, the strongest since April 8. It traded at $1.3869 per euro after weakening to $1.3889 yesterday, the least since April 11. The common currency dropped 0.1 percent to 141.77 yen.
A custom Bloomberg index of the 20 most-traded emerging-market currencies gained for a fifth day, adding 0.1 percent to to 92.4097 and increasing its weekly gain to 0.6.
Brazil’s real and Colombia’s peso gained the most in developing markets, adding as much as 0.5 percent versus the dollar. Russia’s ruble led declines, dropping 0.6 percent, followed by the Hungarian forint’s 0.3 percent drop.
Indonesia’s rupiah posted its first weekly advance in a month as data showed inflation slowed in April to the least since June and exports exceeded imports for a second month in March.
“The fundamentals are improving and investors are chasing real interest rates offered by Indonesian bonds as inflation slows,” said Mika Martumpal, the head of treasury research and strategy at PT Bank CIMB Niaga in Jakarta. “As long as the trade balance is in surplus, the rupiah should be supported.”
Indonesia’s rupiah rose 0.4 this week to 11,523 per dollar.
South Africa’s rand and the Turkish lira led in weekly gains among the greenback’s 31 major peers, each rising more than 1.4 percent. The euro rose 0.3 percent and the yen was little changed. Chile’s peso fell the most, losing 0.4 percent.
The ruble tumbled as an offensive against pro-Russia separatists in the country’s east defied President Vladimir Putin’s demand to pull back troops with Russia’s army massed across the border.
The rebels shot down two Ukrainian helicopters, killing two pilots, as government forces moved to retake the city of Slovyansk, the Interior Ministry said. The push by the administration in Kiev comes a day after the International Monetary Fund said its board approved $17 billion in loans for Ukraine to help avert a default.
President Barack Obama told a news conference with German Chancellor Angela Merkel in Washington that the U.S. is ready to “move quickly” unless Putin acts to ease tensions, with the next step being sectoral sanctions. The United Nations Security Council is to hold an emergency meeting on Ukraine at Russia’s request.
“We have a range of tools at our disposal” to hit various Russian industries with sanctions, Obama said at a joint news conference with the chancellor.
The greenback jumped earlier as the 288,000 increase in employment was the biggest since January 2012 and followed a revised 203,000 climb the prior month that was stronger than initially estimated. The increase beat forecasts by the most since a Nov. 8 report on October payrolls.
Unemployment (USURTOT) dropped to 6.3 percent, the lowest level since September 2008, from 6.7 percent as fewer people entered the labor force. Wages and hours worked were stagnant.
“Despite seeing one of the strongest payroll numbers in the last six months, the overall view is that the headline was strong but within the report there were still some question marks with regards to the the data,” said Mike Moran, a senior foreign-exchange strategist in New York at Standard Chartered Plc. “It’s not clear evidence that the labor market has tightened significantly. That debate will continue in the next few weeks.”
The dollar also pared gains after U.S. March factory orders rose 1.1 percent, below the 1.5 percent gain forecast by 61 economists surveyed by Bloomberg. It was down from a revised 1.5 percent increase the prior month.
The U.S. currency dropped April 30 against most major peers after the Fed said it will keep interest rates at almost zero for a “considerable time” after its bond-purchasing program ends. It cut monthly bond buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.
Futures prices put the likelihood the Fed will start raising borrowing costs by its June 2015 at 54 percent, compared with 47 percent yesterday, based on trading on the CME Group Inc.’s exchange.
Deutsche Bank AG’s volatility index, based on three-month options for nine major currency pairs, rose to 6 percent from 5.8 percent yesterday, the lowest since July 2007.
“Policy rates stuck close to the zero-bound in the U.S., euro area, U.K. and Japan are to blame” for the low volatility, Sebastien Galy, a senior currency strategist at Societe Generale SA in New York, wrote in an e-mailed note yesterday. “This is good” for emerging-market currencies.
Analysts forecast the European Central Bank and the Bank of England will maintain their benchmark borrowing costs at 0.25 percent and 0.5 percent at their next policy announcements on May 8. The Bank of Japan switched its main policy tool in April last year to setting the amount of money that it provides from adjusting interest rates.
The dollar declined 3.1 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen dropped 3.2 percent and the euro was little changed.
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