US Dollar Bears Awaken Before Jobs Report as BOJ-Stoked Rally Fades

New Yorl (Feb 3)  The dollar is having a rough ride this week, based on the outlook for the world’s largest economy. A gauge of the U.S. currency extended the losses of the past two days before a private-sector report that’s forecast to show companies created jobs last month at the slowest pace since October. Later on Wednesday, the Institute for Supply Management will say its non-manufacturing index, which covers almost 90 percent of the economy, fell in January to the lowest in almost two years, analysts surveyed by Bloomberg predict.

And on Friday, the government’s key employment report will show the U.S. created fewer than 200,000 jobs last month for the first time since September, according to economists.

Intercontinental Exchange Inc.’s U.S. Dollar Index has tumbled from an almost two-month high set on Jan. 29, when the Bank of Japan’s decision to implement negative interest rates drove investors into the greenback. Now, traders are refocusing their attention on the outlook for U.S. borrowing costs, with the prospect of tighter Federal Reserve policy seen to be fading amid an uneven domestic recovery and global market turmoil.

“Whoever said that the dollar may benefit from the Fed hiking rates might be disappointed,” said Roberto Mialich, a senior foreign-exchange strategist at UniCredit SpA in Milan. “If markets continue to imagine that the pace of the normalization process in the U.S. might be slower than they expected in December, when the Fed kicked off, the dollar will remain sluggish.”

Friday Peak

The Dollar Index, which tracks the U.S. currency against six major peers, fell 1.2 percent to 97.736 as of 10:02 a.m. New York time. That left it more than 2 percent lower than the peak on Jan. 29, which was the gauge’s highest level this year.

The dollar dropped 1.2 percent to 118. yen, and declined 1 percent to $1.1024per euro.

The probability the Fed will boost its benchmark rate from a range of 0.25 percent to 0.5 percent this year has fallen along with oil prices. There’s a less than 50 percent chance of an increase by the central bank’s December meeting.

Source: Bloomberg