The dollar fell versus a basket of peers as employment gains failed to signal sustained economic growth, damping speculation that the Federal Reserve will raise borrowing costs soon.
The U.S. currency dropped from a five-week high versus the euro as employers added 192,000 workers in March and the unemployment rate was unchanged. Federal Reserve Chair Janet Yellen highlighted the job market in a speech this week, saying that the recovery “still feels like a recession to many Americans” and that the world’s biggest economy will need Fed stimulus for “some time.”
The greenback “would sell off broadly and dollar-yen would come off hard, too, on a bad print,” Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal, said by phone from New York before the jobs report. “Not that it probably changes the timetable for taper, but it pushes the first rate hike from second quarter to third quarter.”
The Bloomberg U.S. Dollar Index (NYBOT:DXH14) fell 0.2 percent to 1,018.30 at 8:34 a.m. in New York.
The payrolls gain last month followed a 197,000 climb in February that was larger than first estimated, the Labor Department reported in Washington. The median forecast in a Bloomberg survey projected a 200,000 gain. Private employment, which excludes government jobs, surpassed the pre-recession peak for the first time. The jobless rate held at 6.7 percent.
Traders brought forward bets on when the Fed will raise borrowing costs after Yellen signaled last month the central bank may end the bond-purchase program it uses to support the economy in the second half of 2014, and increase rates six months after that. It has trimmed monthly buying to $55 billion from $85 billion last year.
While U.S. policy makers are signaling room for tightening in the coming months or years, their counterparts in Europe have suggested the opposite.
European Central Bank President Mario Draghi yesterday strengthened his pledge that officials are ready to take further policy action to head off any risk of deflation even as they refrained from changing their benchmark interest rate, which has been at 0.25 percent since November.
Jobless claims increased 16,000 in the period ended March 29 to a five-week high of 326,000, the Labor Department reported yesterday in Washington. A revised 310,000 applications were filed in the previous week, the fewest since Sept. 7. The median forecast of 52 economists surveyed by Bloomberg called for 319,000 claims.
Themes that have subdued the dollar against other currencies may subside in the second half of the year, Mark McCormick, a macro strategist at Credit Agricole SA in New York, wrote yesterday in a client note. Those factors include U.S. economic data that has failed to boost Treasury yields, reports that China may undertake stimulus to support the economy and tensions between Ukraine and Russia, he said.
“We look for a reversal of some these themes to boost the greenback,” McCormick wrote.