* U.S. nonfarm payrolls rise 209,000 in July
* Data shows low U.S. wage inflation
* ISM U.S. factory activity rises to 57.1 in July
(Updates prices, adds comments, changes dateline; previous
By Sam Forgione
NEW YORK, Aug 1 The U.S. dollar dipped against a
basket of major currencies on Friday after the U.S. government's
July employment report showed no signs of wage inflation,
supporting a continued dovish stance from the Federal Reserve.
The Labor Department said U.S. nonfarm payrolls increased
209,000 last month, below economists' expectations for an
increase of 233,000, while the unemployment rate unexpectedly
rose to 6.2 percent. Data for May and June, meanwhile, were
revised to show a total of 15,000 more jobs created than
Analysts said the lower-than-expected jobs growth still
showed solid momentum when combined with the upward revisions
for the prior two months. They also said the increase in the
labor force participation rate, to 62.9 percent from 62.8
percent, and roughly flat average hourly earnings growth were
more critical, because they indicated a lack of wage inflation.
"If wage inflation is falling, that gives the Fed more room
to keep interest rates at zero," said Jose Wynne, global head of
FX research at Barclays in New York. The Fed is closely
monitoring wage inflation as a potential signal of reduced slack
in the economy, which could prompt the central bank to raise
Wynne said the dollar's dip was mild since traders continued
to chase an upward trend in the currency. The dollar climbed
more than 2 percent in July to notch its best monthly gain in
nearly 1-1/2 years, largely on the view that recovering U.S.
economic growth would pave the way for a more hawkish Fed.
The U.S. dollar index, which measures the dollar
against a basket of six major currencies, was last down 0.18
percent at 81.312, retreating further from Thursday's
10-1/2-month high of 81.573.
The dollar index held losses after The Institute for Supply
Management (ISM) said its index of national factory activity
rose to 57.1 in July. That was the highest since April 2011.
"The ISM reflects underlying strength in the U.S. economy"
but was overshadowed by the employment report, said Shaun
Osborne, currency strategist at TD Securities.
Consumer sentiment for July, meanwhile, was slightly below
expectations. Thomson Reuters/University of Michigan's final
July reading on the overall index on consumer sentiment came in
at 81.8, a touch below the 82.0 estimate.
The euro was last up 0.28 percent against the dollar
at $1.3424 after hitting a session high of $1.3433.
Against the yen, the dollar was last down 0.12
percent at 102.68 yen after hitting a low of 102.65 yen, and was
down 0.31 percent against the Swiss franc at 0.9057 franc
after hitting a session low of 0.9054 franc.
The yield on benchmark 10-year U.S. Treasury notes
edged down to 2.53 percent, from 2.56 percent late
(Reporting by Sam Forgione; Editing by Dan Grebler)