US Dollar tumbles as Treasuries gain with US futures on wage data

New York (July 31)  The dollar retreated and Treasuries rose on speculation slow US wage growth will delay Federal Reserve plans for higher interest rates. US stock futures erased earlier losses.

The Bloomberg Dollar Spot Index dropped 0.7 per cent at 9:05 am in New York, while yields on 10-year Treasuries lost 6 basis points to 2.21 per cent. Standard & Poor’s 500 Index E-mini contracts expiring in September rose 0.1 per cent to 2,106, after slipping 0.3 per cent earlier.

“This came as a pretty big stunner for the markets,” said Robert Sinche, a strategist at Amherst Pierpont Securities LLC in Stamford, Connecticut. “The dovish wing of the Fed is going to latch onto this wage data pretty aggressively.”

Federal Reserve Chair Janet Yellen and her colleagues are counting on rising wages to boost the economy and bring inflation closer to their 2 per cent goal. The setback may prompt some officials to call for a delay in raising interest rates for the first time since 2006.

“It makes it that much tougher for the Fed to raise rates when you have no wage growth,” Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co, which oversees US$110 billion (RM419.4 billion), said by phone. “In a market that’s trading in such a tight trading range, investors are taking any piece of material that comes out as potentially being important to changing the character of the market.” 

Source: Bloomberg