Dollar declines as Fed seen unmoved by jobs report

The dollar (NYBOT:DX) fell after a report showed U.S. employers added jobs last month as investors bet signs of improvement in the world’s largest economy won’t bring interest- rate increases any sooner.

The U.S. currency weakened versus most of major peers as nonfarm payrolls increased by 217,000 in May, versus 282,000 in April and a gain of 215,000 projected by economists in a Bloomberg survey. The unemployment rate held at 6.3 percent. The euro (CME:EC) weakened against its higher-yielding peers earlier after the European Central Bank’s announced its package of stimulus measures yesterday. South Africa’s rand and Brazil’s real led gains against the greenback

“Everything correlated with risk will be doing well,” said Steven Englander, the New York-based global head of Group of 10 foreign-exchange strategy at Citigroup Inc. “This is an unthreatening number and I think that when it’s unthreatening people go back to buying carry and taking on risk.”

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, dropped 0.1 percent to 1,010.96 at 8:44 a.m. New York time.

The euro rose 0.1 to $1.3670, after touching the lowest level since Feb. 6 yesterday. The currency dropped 0.1 percent to 139.74 yen. The yen added 0.2 percent to 102.26 per dollar.

Picking up

Today’s data added to signs the U.S. economic recovery is picking up after gross domestic product shrank in the first quarter an annualized 1 percent amid harsh winter weather.

A Labor Department report yesterday showed fewer Americans filed applications for unemployment benefits over the past month than at any time in seven years. The four-week average for jobless claims fell to 310,250 in the period ended May 31.

A gauge of service industries that make up almost 90 percent of the U.S. economy increased more than forecast in May, the Institute for Supply Management reported June 4. Its non- manufacturing index rose to 56.3, from 55.2 a month earlier. A Bloomberg estimated a gain to 55.5. An ISM index of manufacturing expanded in May at the fastest pace this year, rising to 55.4, the Tempe, Arizona-based group said June 2.

“Because we’re right in line with the consensus it doesn’t really give you much in terms of how the Fed’s view point will change,” said Brian Daingerfield, currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut. “We’re due for a pretty muted close out to the week after a number that came basically in line with where the economists and where trend has been in terms of U.S. job growth.”

Fed policy

The Fed, which meets June 17-18 to review policy, is slowing the pace of the bond purchases it uses to hold down long-term borrowing costs and fuel growth. It has kept the benchmark interest-rate in a range of zero to 0.25 percent since 2008 and hasn’t raised rates since 2006.

Fed Chair Janet Yellen testified to lawmakers May 7 that the central bank will probably end bond-buying in the fall if the labor market continues to improve. Still, she said “a high degree of monetary accommodation remains warranted” with employment and inflation far from the central bank’s goals.

The Canadian dollar (CME:CD) fell after the nation’s unemployment rate unexpectedly rose last month.

“You get the sense the Canadian economy is just fighting for momentum,” said David Watt, chief economist at the Canadian unit of HSBC Holdings Plc, by phone from Toronto, before the report. “You get open to the idea, despite inflation being at 2 percent, maybe you have more credible discussion the next move by the bank could be a cut.”

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell 0.1 percent to C$1.0932 per U.S dollar.

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