January 13, 2014 / 9:46 PM / 4 years ago

FOREX-Dollar slides as weak jobs data spurs Fed policy rethink

* Dollar hits four-week low vs yen
    * Dollar doubts could increase if Tuesday retail data soft
    * Aussie hits one-month high, kiwi at eight-week peak

    By Curtis Skinner
    NEW YORK, Jan 13 (Reuters) - The dollar dropped to its
lowest level in four weeks against the yen on Monday, as last
week's soft U.S. jobs data dampened optimism about the outlook
for the world's largest economy.
    The dollar's weakness helped push the Australian dollar to a
one-month high and the New Zealand dollar to an eight-week high
against the greenback.
    The greenback fell to its weakest point against the yen
since Dec. 18, to 102.86 yen. It was last down 1.17 percent at
102.89 yen.
    "Dollar/yen is having a clear aftershock reaction to the
very weak (non-farm payroll) number, because the number reset
expectations across all markets -- including interest rate
markets, which are very important to dollar/yen," said Boris
Schlossberg, managing director of FX strategy at BK Asset
Management in New York.
    "And there's anticipation that tomorrow's retail numbers are
going to be soft. If that number is soft, it's just going to
compound the problem," he said.
    The dollar continued its slide against the yen after Dennis
Lockhart, president of the Federal Reserve Bank of Atlanta,
highlighted concern about the still-struggling U.S. labor
market. 
    Dollar/yen was one of the strongest-performing major
currency pairs last year, and many hedge funds have been betting
the trend will continue as the Fed cuts back its huge
bond-buying program while the Bank of Japan continues to provide
even more stimulus this year.
    But many traders were taken by surprise by Friday's U.S.
jobs report for December, which showed the creation of just
74,000 new jobs, well short of the 196,000 that analysts had
expected. The data tempered some expectations for the Fed's
rapid reduction of bond-buying stimulus, though one bad labor
market report isn't likely to deter the Fed from reducing
monthly bond purchases, now at $75 billion. 
    Yields on 10-year U.S. Treasuries, which were
above 3 percent in the middle of last week, have fallen to
around 2.83 percent, their lowest since mid-December, lending
less support to the dollar.
    The implied yields on Fed funds futures also tumbled
as markets pushed back the timing of the first interest rate
hike out toward late-2015 from mid-2015.
    Investors were also looking for direction with Japanese
financial markets closed on Monday for a public holiday.
    The yen, up broadly against major currencies on Monday, also
pushed higher versus the euro, which fell 1.19 percent to 140.64
yen. The euro touched a low of 140.48 yen, its lowest
level in six weeks.
    The euro was unchanged against the dollar at $1.3667,
staying above a one-month trough of $1.3548 hit on Thursday.
    Volumes were high in the Australian dollar, which has been
weak against the U.S. dollar in recent months after comments by
the central bank governor saying he would prefer to see the
local dollar lower. The Aussie hit a one-month high of US$0.9054
, however, and was last at US$0.9058, up 0.72 percent.
    The New Zealand dollar touched an eight-week high of
US$0.8387, and was last at US$0.8365, up 0.8 percent.
    The Canadian dollar headed back toward its lowest level in
more than four years against the greenback after data showed
that Canada unexpectedly shed jobs last month. 
    The loonie, which fell in every session last week against
its U.S. peer, last stood at C$1.0854 per dollar. The
U.S. dollar had scaled a peak of C$1.0944 on Friday, the
greenback's strongest level since October 2009.

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