Dollar Falls to 2-Week Low as Payrolls Weaken Fed Liftoff Case

  • Haven currencies yen, euro gain amid global economic concern
  • U.S. employment growth trails forecast as wages stagnate

The dollar fell to a two-week low after U.S. payrolls rose less than forecast and wages stagnated, reducing the case for the Federal Reserve to raise interest rates for the first time in almost a decade.

The Bloomberg Dollar Spot Index declined after a Labor Department report showed the economy added 142,000 jobs in September, trailing the forecast for 201,000.  Futures prices showed the central bank is unlikely to increase interest rates until next year. Haven currencies including the euro and the yen strengthened amid concern the U.S. isn’t immune to global economic headwinds.

“Anything that removes or pushes out Fed tightening is going to weigh on the dollar,” said Roger Bayston, senior vice president and director of fixed income at the Franklin Templeton fixed-income group in San Mateo, California. “The currency picture going forward is really going to be determined by whether we see any stabilization in growth in some of these global economies.”

The dollar gauge fell 0.3 percent to 1,208.91 as of 5 p.m. in New York, and reahced its lowest level since Sept. 18. The U.S. currency dropped 0.2 percent to $1.1216 per euro and was little changed at 119.91 yen.

‘Getting Smacked’

“The U.S. dollar is getting smacked versus the Japanese yen and euro,” Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia, wrote in an e-mail.

The news buoyed refuge currencies with the Swiss franc, the yen and the euro among those leading the charge against the dollar. The European Central Bank and the Bank of Japan are engaged in unprecedented attempts at monetary stimulus designed to boost employment and price gains.

Falling oil prices, political unrest and an ongoing rout in commodities caused emerging-market currencies to trail their G-10 counterparts this year. The Brazilian real has depreciated about 32 percent against the dollar since January.

"Bad news is bad news, we’re seeing it for currency markets, the dollar is weaker in the Group of Three, against the euro and yen," said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in London. "And until risk sentiment recovers, I think emerging markets will be on the sidelines."

The September jobs gain followed a revised 136,000 gain the prior month that was lower than previously estimated. The jobless rate held at 5.1 percent, and wage growth was unchanged.

Economic Reading

Average hourly earnings were unchanged from the month before, the report showed. They increased 2.2 percent during the 12 months ended in September, the same year-over-year change as in August. They’ve posted a 2 percent gain on average since the current expansion began in mid-2009.

"It’s hard to get behind the dollar following a report like this," said Omer Esiner, chief market analyst at currency brokerage Commonwealth Foreign Exchange Inc. in Washington. "It’s not just a headline miss, but really there’s weakness across all facets of this report. "

Traders see a 34 percent probability that the Fed raises rates by the December meeting, down from 58 percent a month ago, according to futures data compiled by Bloomberg. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff.

The dollar has surged about 15 percent in the past year, making it the best performer among 10 developed-nation peers, according to Bloomberg Correlation-Weighted Currency Indices. It fell against the yen and euro in the past three months as the Fed kept interest rates near zero amid concern about Chinese economic growth.

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