Dollar Falls Versus Majors on Mixed Data as Ukraine Simmers

The dollar weakened against most major peers as traders bet data showing mixed employment growth may keep the Federal Reserve from accelerating interest-rate increases as the economy emerges from a first-quarter slowdown.

A Bloomberg Dollar Spot Index fell the first time in three weeks as a report showing employers boosted payrolls also revealed the lowest participation rate since 1978. The euro climbed versus the greenback on haven demand amid tensions in Ukraine. Emerging-market currencies rose after Fed Chair Janet Yellen said interest rates will remain at almost zero for “a considerable time” after the central bank’s bond-buying ends. She testifies before Congress on May 7.

“The economy is improving and the jobs data was strong without a doubt, but not strong enough to bring forward Fed rate-hike projections -- given the devil in the details -- and that weighed on the dollar,” Michael Woolfolk, a global-markets strategist at Bank of New York Mellon in New York, said yesterday in a phone interview. “The weakness in the data remind everyone that the economy isn’t perfect.”

The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, fell 0.3 percent on the week to 1,007.72 in New York. It touched 1,007.18, lowest since April 14.

The dollar dropped 0.3 percent on the week to $1.3869 per euro and weakened to $1.3889 on May 1, the least since April 11. The U.S. currency was little changed versus at 102.20. The common currency strengthened 0.3 percent to 141.77 yen.

Emerging Markets

A custom Bloomberg index of the 20 most-traded emerging-market currencies rose all five days, adding 0.6 on the week to 92.4091.

South Africa’s rand led in weekly gains among 24 developing-nation currencies followed by Bloomberg, gaining 1.8 percent. Turkey’s lira added 1.4 percent. The Thai baht slid 0.5 percent and Chile’s peso fell 0.4 percent to pace decliners.

Futures traders increased their bets that the yen will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- net shorts -- was 70,352 on April 29, compared with net shorts of 67,243 a week earlier.

Deutsche Bank AG’s volatility index, based on three-month options for nine major currency pairs, fell to 5.8 percent on May 1, the lowest since July 2007.

‘Geopolitical Risk’

“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 euro gained against the dollar and yen as Ukraine sent armored vehicles and artillery to retake Slovyansk, a separatist stronghold. President Barack Obama and German Chancellor Angela Merkel set a May 25 trigger for possible economic sanctions against Russia.

Rebels shot down two helicopters, killing two pilots, the Defense Ministry said. In Odessa, dozens died after a trade-union building was set afire, the Interior Ministry said.

“Ukraine issues have given the euro some strength,” Bank of New York Mellon’s Woolfolk said. The shared currency “has become a safe haven in its own right, which has weighed on the dollar.”

‘Question Marks’

The dollar jumped initially after the Labor Department reported a 288,000 increase in employment, the biggest since January 2012, and a drop in unemployment to 6.3 percent, the lowest level since September 2008.

The report also showed the share of the working-age population either employed or seeking a job declined in April for the first time this year, pushing the participation rate to 62.8 percent, matching the lowest since March 1978. Hourly earning declined.

“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 U.S. currency dropped April 30 as gross domestic product grew at a 0.1 percent annualized rate from January through March, compared with a 2.6 percent gain in the prior quarter, figures from the Commerce Department showed.

Fed View

The Fed said this week it will keep reducing the pace of bond purchases as the economy shakes off the winter doldrums, putting the central bank on a course to end the unprecedented stimulus program by the close of 2014.

It cut monthly bond buying to $45 billion, its fourth straight $10 billion cut, and held its main borrowing rate at almost zero, where it’s been since 2008.

Futures prices put the likelihood the Fed will start raising borrowing costs by its June 2015 at 47 percent yesterday, based on trading on the CME Group Inc.’s exchange.

Treasury bonds rose for a second week, pushing yields to the lowest level since June, as signs of uneven economic growth and tension in Ukraine drove investors to the safety of U.S. government debt.

“To get anyone very excited about the dollar, you will have to see higher yields, and we don’t have that yet,” Carl Forcheski, a director on the corporate currency-sales desk at Societe Generale SA in New York, said yesterday. “The economy has improved, but people are not yet convinced that the U.S. economy is strong enough to push yields up, and it’s kept a lid on the dollar’s strength.”

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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