The US dollar slipped against a basket of major currencies on Thursday after disappointing US jobs data pushed out bets for a Federal Reserve rate hike to 2016, while caution ahead of this weekend's Greek referendum limited losses. Nonfarm payrolls increased by 223,000 last month, the Labour Department said. Adding to the report's soft note, April and May data was revised to show 60,000 fewer jobs were added than previously reported, while the labour force participation rate fell to its weakest since October 1977.
"The lower-than-expected jobs data has definitely cut down the expectations for two rate hikes before the end of the year," said Alfonso Esparza, senior currency Strategist at Oanda in Toronto. After the data, futures contracts showed that traders saw January as the first Fed meeting at which a rate hike is more likely than not, based on CME FedWatch, which tracks expectations using its Fed funds futures contracts. Rate hikes are seen as boosting the dollar by driving investment flows into the United States.
While the dollar fell from a nearly one-week high against the yen, a five-week high against the Swiss franc, and a 3-1/2-week high against a basket of six major currencies, the losses were limited, and the greenback remained above Wednesday's session lows. The euro remained on track for its second straight weekly percentage decline against the dollar, of about 0.7 percent.
Analysts said activity was muted because market participants were awaiting the outcome of Greece's July 5 referendum on a bailout deal and were refraining from making sizable bets ahead of the US Independence Day holiday. "If there is a Greece exit from the euro, there is no way to tell where the contagion will stop," said Lane Newman, director of foreign exchange for ING Capital Markets in New York.
Analysts said currency trading would be subdued on Friday, when US markets will be closed. The euro was last up 0.22 percent against the dollar at $1.10775 after hitting a session high of $1.11220 following the jobs data. The dollar was down 0.05 percent against the yen at 123.110 yen after hitting a session low of 122.960 yen. The dollar was 0.37 percent lower against the Swiss franc at 0.94450 franc after hitting a session low of 0.94200 franc. The dollar index, which measures the greenback against a basket of six major currencies, was down 0.18 percent at 96.139.
- tumbles against basket of currencies in Europe
NEW YORK: The dollar fell against a basket of currencies on Friday, hurt by softer-than-expected US employment data amid thin volumes with most investors staying on the sidelines before Greece's weekend referendum on bailout conditions. Volumes eased in the afternoon session in Europe with US markets closed for Independence Day. Caution reigned, with investors trimming positions in riskier assets and currencies before the Greek vote on Sunday on an international bailout deal that could determine whether the country stays in the euro zone.
The dollar index was down 0.1 percent at 96.001, retreating from a four-week high of 96.422 hit earlier in the day. The greenback was buying 122.65 yen, 0.3 percent lower on the day. The euro shed 0.2 percent against the safe-haven yen but edged up 0.1 percent to $1.1100. "With liquidity thin and the Greek referendum coming up, not many would want to take large positions going into the weekend. The US jobs report has taken the wind out of the sails for the dollar for the time being," said Alvin Tan, currency strategist at Societe Generale.
The US payrolls report showed employers hired 223,000 workers last month, fewer than the 230,000 increase forecast in a Reuters poll. The government also downgraded its reading on April and May job growth, while wage growth remained subdued. Investors had been hoping that solid improvement in the labour market would reinforce expectations that the Federal Reserve will raise interest rates as early as September. Still, the report was not gloomy enough to quash expectations that the Fed would tighten later this year.
All in all, major currencies were hugging familiar ranges, with the euro supported by a poll that showed supporters of Greece's bailout terms taking a wafer-thin lead over the "No" vote backed by the leftist government. Another poll by the Avgi newspaper, though, showed the 'No' camp were just in front. "For the euro, a 'Yes' vote could lead to a bounce, but we would still prefer to sell it on rallies," added Societe Generale's Tan.
The International Monetary Fund warned on Thursday that Greece would need an extension of its European Union loans and a potentially large debt write-off if it cannot implement economic reforms and its growth slows. Analysts said negotiations after a "Yes" vote are likely to be prickly, and would keep gains in the euro limited. Meanwhile, the Australian dollar fell to a 6-year low, hurt by disappointing domestic retail sales data and a continued sell-off in the Shanghai stock market. China is Australia's biggest trading partner and the Aussie is used as a proxy. The Aussie fell to $0.7509, down 1.6 percent on the day, and its lowest level since mid-2009. "We expect the Aussie to trend lower towards $0.72 medium-term," said Jane Foley, senior currency strategist at Rabobank.
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