US Dollar ends week on uneven footing after mixed jobs report
New York (Sept 5) The dollar finished the week on uneven footing, posting its second straight weekly gain against the euro, while weakening against the yen after Friday’s closely watched jobs report delivered a hazy picture of the U.S. labor market.
The headline number of 173,000 for the U.S. Labor Department’s nonfarm-payroll report missed a consensus forecast for 213,000, but analysts said the details of the report were more encouraging. Job gains for July and June were revised up by a combined 44,000, which helped bring the unemployment rate down to 5.1%.
Market participants were split on how the labor report would influence the Federal Reserve’s decision to lift rates for the first time in nearly a decade at their two-day policy meeting, which begins Sept. 16.
“The Fed deems [an unemployment rate between 5% and 5.2%] full employment, and that provides even more support to the case to raise interest rates,” said Andrew Dilz, a currency strategist at Tempus Inc.
However, others didn’t think the August jobs data necessarily provide clear support for a hike.
“August’s employment report is fairly mixed and can be used to make a case for or against a rate increase at the coming FOMC meeting,” said Paul Ashworth, chief U.S. economist at Capital Economics, in a research note released shortly after the data.
The employment report for August on Friday, which supported the dollar against emerging-markets and commodity-linked currencies, but had little impact on how it traded against its main rivals.
Read: ‘Strong’ report except for headline number, economists say
The dollar recorded the bulk of its weekly gains against the euro on Thursday after European Central Bank President Mario Draghi warned about new threats to eurozone growth: a slowdown in emerging-market economies and falling commodity prices.
Draghi hinted that the central bank could expand its program of stimulus measures to combat flagging growth — which sent the euro tumbling. The shared currency EURUSD, +0.2607% finished the week down 0.4% at $1.1140.
Read: Here’s why Mario Draghi sent the euro spiraling lower
Meanwhile, the dollar weakened against the yen as a disappointing reading on manufacturing-sector activity reignited fears about slowing growth in China, prompting investors to move out of risk assets, said Kit Juckes and Alvin Tan, two currency strategists at Société Générale.
The dollar USDJPY, -0.88% finished the week down 1.9% at ¥119.09.
The Chinese yuan USDCNY, +0.2234% finished the week up 0.4% to 6.37 yuan to the dollar, contradicting the notion that China’s devaluation of its currency would lead to widespread market chaos as it dragged rival emerging-markets currencies lower.
Robin Brooks, chief FX strategist at Goldman Sachs, said he the Chinese currency is already close to “fair value” so “the rational for a bigger weakening doesn't look strong to us,” he said in a Friday note to clients.
The WSJ Dollar Index BUXX, +0.17% a measure of the U.S. currency’s strength against a basket of currencies, was up 0.1% to 88.90.