US Dollar turns lower as traders brush off jobs data

Frankfurt (Apr 2)  The dollar turned lower in midafternoon trade Friday as investors decided that the March jobs report, while better-than-expected on its surface, likely wouldn’t change the Federal Reserve’s plan for raising interest rates.

The ICE U.S. dollar DXY, -0.02% a measure of the buck’s strength against a basket of rival currencies, was up 0.1% at 94.6490 late Friday in New York, after rising as high as 95.1100 earlier in the session.

Analysts described the dollar’s early gains as a “knee-jerk reaction” to a spate of strong economic data — notably the March jobs report and ISM manufacturing numbers.

But once the dust settled, investors determined that the data would likely have little bearing on the Fed’s plans for raising interest rates. In a speech at the Economic Club of New York on Tuesday, Federal Reserve Chairwoman Janet Yellen had outlined a cautious approach.

“Because of underemployment and dovish comments from Yellen earlier in the week, the numbers would’ve had to blow away expectations to really help the dollar,” said John Doyle, director of markets at Tempus.

The U.S. economy created 215,000 jobs in March, according to the Labor Department. Of particular importance was a reading on average hourly wages, which grew 0.3% in March after declining 0.1% in February. The number shows U.S. inflation is on track to continue rising.

However, the jobs report wasn’t entirely free of blemish. The unemployment rate crept higher to 5%, from 4.9% in the prior month, due to a rise in participation.

Data on the U.S. manufacturing sector offered a glimmer of hope amid a drumbeat of weak indicators released since late last year. Both the PMI and ISM manufacturing numbers roughly met expectations.

A jump in ISM new orders was a highlight, suggesting that the U.S. manufacturing sector could continue to improve. The picture for manufacturing wasn’t entirely one-sided, though: The jobs data showed manufacturing jobs declined again in March.

Jameel Ahmad, chief market analyst at FXTM, said the dollar’s gains were limited by the fact that traders still expect only two interest rate increases from the Federal Reserve this year.

“U.S. economic growth is still reasonably strong, it’s just not at such exceedingly strong levels that traders are rushing toward the dollar like they were last year,” Ahmad said.

The euro EURUSD, +0.0967%  was at $1.1394 late Friday in New York, compared with $1.1381 late Thursday, after trading $1.1438 ahead of the U.S. data. With a weekly gain of 2%, the shared currency logged its strongest performance against the dollar since Feb. 5.

The British pound GBPUSD, -0.9192%  weakened against the dollar as investors worried about the possibility of the U.K.’s exit from the European Union — the so-called Brexit. The currency traded at $1.4215 late Friday in New York, compared with $1.4366 late Thursday.

In other trading, the euro EURGBP, +1.0601%  broke above 80 pence on Friday, its highest level against its British rival since August 2014. It traded at 79.22 pence late Thursday.

Read: Payrolls report may show march of workers back into the jobs market

The dollar turned lower against the yen after rising earlier in the session. One dollar USDJPY, -0.77% bought ¥111.71 late Friday in New York, its weakest level in nearly two weeks. By comparison, it traded at ¥112.51 late Thursday. The dollar’s weekly decline of 0.9% against the yen represented its worst performance in two weeks.

In other news, Cleveland Fed President Loretta Mester warned Friday that waiting for markets to calm down before raising interest rates could backfire for the Fed. But analysts said her remarks had little bearing on the dollar.

Source: MarketWatch