By Gertrude Chavez-Dreyfuss and Amanda Cooper
NEW YORK/LONDON (Reuters) – The dollar edged higher on Wednesday, recovering from two-month lows hit the previous session, as investors lightened their short positions to book profits ahead of the all-important U.S. non-farm payrolls report on Friday.
The underlying trend though for the dollar remained tilted to the downside and Wednesday’s U.S. private sector jobs numbers affirmed that. The data supported the view that the Federal Reserve may not need to raise rates much further.
In late morning trading, the dollar index rose 0.2% to 101.75, led by gains against the euro, which fell 0.3% to $1.0925.
The ADP National Employment report showed U.S. private employers hired far fewer workers than expected in March, suggesting a cooling labor market. Private employment increased by 145,000 jobs last month. Economists polled by Reuters had forecast private employment increasing 200,000.
The data came after Tuesday’s report showing a decline in job openings for February and an increase in firings, as well as a weak U.S. manufacturing survey from the Institute for Supply Management, which also pointed to a soft employment component.
Another report on Wednesday also indicated continued economic weakness, this time in the services sector. That industry slowed more than expected in March as demand cooled, while a measure of prices paid by services businesses fell to the lowest in nearly three years.
The ISM’s non-manufacturing index fell to 51.2 last month from 55.1 in February, while the prices paid component declined to 59.5 from 65.6 in February with the services sector’s employment indicator sliding as well to 45.8 from 47.6 in February.
“People are coming to the realization that the strength (in economic data) we saw in January was just a blip. It wasn’t a trend,” said Thierry Wizman, global FX and rates strategist at Macquarie in New York.
“Yes inflation is still high, but there is plenty of evidence in the pipeline showing that disinflation is the underlying trend…and part of the basis as to why the Fed is sounding ambiguous these days.”
Cleveland Federal Reserve Bank President Loretta Mester, a known hawk, said in an interview with Bloomberg TV on Wednesday that it was too early to know if the U.S. central bank would need to raise its benchmark interest rate at its next policy meeting in early May.
U.S. rate futures markets are now pricing in a 62% chance of the Fed leaving rates unchanged at its next meeting, up from a 43% chance a day earlier. On Tuesday, markets had still factored in a more than 60% chance of a small rate hike of 25 basis points (bps) next month.
The dollar headed for a third daily loss against the Japanese yen, falling 0.6% to 130.92. Against the Swiss franc, the greenback was last down 0.1% at 0.9047 francs
GRAPHIC: https://www.reuters.com/graphics/FOREX-DOLLAR/akveqngrmvr/chart.png
The Australian dollar though tumbled 0.6% against the U.S. currency to US$0.6714, a day after the central bank left rates unchanged at 3.6% following 10 straight hikes, saying it needed more time to assess the impact of past increases.
The New Zealand dollar, meanwhile, rose 0.1% versus the greenback to US$0.6315, rallying by as much as 1.1% to a two-month high of US$0.6383 after the Reserve Bank of New Zealand unexpectedly raised interest rates by 50 bps to a more than 14-year high of 5.25%.
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Currency bid prices at 10:42AM (1442 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 101.7500 101.5200 +0.24% -1.681% +101.7900 +101.4000
Euro/Dollar $1.0923 $1.0958 -0.31% +1.95% +$1.0970 +$1.0922
Dollar/Yen 131.0000 131.7050 -0.51% -0.06% +131.8400 +130.6400
Euro/Yen 143.02 144.29 -0.88% +1.94% +144.4400 +142.9500
Dollar/Swiss 0.9048 0.9061 -0.13% -2.14% +0.9060 +0.9010
Sterling/Dollar $1.2458 $1.2500 -0.32% +3.03% +$1.2514 +$1.2456
Dollar/Canadian 1.3460 1.3444 +0.13% -0.65% +1.3482 +1.3427
Aussie/Dollar $0.6707 $0.6753 -0.68% -1.61% +$0.6780 +$0.6678
Euro/Swiss 0.9882 0.9926 -0.44% -0.13% +0.9932 +0.9878
Euro/Sterling 0.8768 0.8758 +0.11% -0.86% +0.8785 +0.8760
NZ $0.6309 $0.6312 +0.00% -0.60% +$0.6379 +$0.6282
Dollar/Dollar
Dollar/Norway 10.4220 10.3190 +1.01% +6.21% +10.4330 +10.3150
Euro/Norway 11.3874 11.2915 +0.85% +8.52% +11.4252 +11.2799
Dollar/Sweden 10.3887 10.2740 +0.87% -0.18% +10.3919 +10.2602
Euro/Sweden 11.3490 11.2508 +0.87% +1.79% +11.3557 +11.2435
(Reporting by Gertrude Chavez-Dreyfuss in New York and Amanda Cooper in London; Additional reporting by Ankur Banerjee in Singapore; Editing by Sonali Paul, Muralikumar Anantharaman, Chizu Nomiyama and Conor Humphries)
Disclaimer: This report is auto generated from the Reuters news service. ThePrint holds no responsibilty for its content.