The dollar fell to a one-week low after a U.S. jobs report weakened the case for the Federal Reserve to raise interest rates as soon as this month.
The greenback sank against the world’s major currencies as the Labor Department said wage gains trailed projections and nonfarm employment climbed by 151,000 last month, compared with a median forecast of 180,000 in a Bloomberg survey. Payrolls for August have fallen short of estimates for six-straight years.
“Initial reaction in the U.S. dollar was a dip as the payrolls missed expectations,” John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in Hellerup, Denmark, said by e-mail. “That doesn’t exactly excite the pulse for a September rate move.”
Signs of weakness in the world’s biggest economy may extend the dollar’s 4.2 percent slump this year by dimming expectations that U.S. monetary policy will further diverge from that of the Bank of Japan and the European Central Bank, which are adding stimulus to spur growth and inflation.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.4 percent as of 8:38 a.m. in New York, reaching the lowest level since Aug. 26. The greenback dropped 0.4 percent to $1.1240 per euro and declined 0.4 percent to 102.87 yen.
“The U.S. dollar sold off in the initial reaction to the headline disappointment,” said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. “I don’t think the dollar will lose too much ground on this. It’s not a smoking gun for a September hike, but it should sustain expectations of a move in the next few months -- possibly December.”
The weaker-than-forecast monthly labor-force number comes after the previous two readings exceeded expectations. Slowing jobs growth threatens to derail the Fed’s ability to boost borrowing costs after Chair Janet Yellen said last week that the case for higher rates has strengthened.
Traders saw about a 22 percent probability of a Fed rate increase this month, down from 34 percent before the report, and a 55 percent probability of a hike in 2016, down from 59 percent, according to futures data compiled by Bloomberg.
Average hourly earnings rose 0.1 percent from a month earlier to $25.73, following a 0.3 percent increase in the prior month. The year-over-year increase was 2.4 percent, compared with 2.7 percent in the 12 months through July.