Dollar tumbles on weak US jobs data

The dollar plumbed one-month lows against the euro and the yen on Friday after data showed US job growth in June fell short of expectations and heightened concern that the US economy may be slowing.
The dollar sank against the euro to $1.2865, the lowest since early June, after the government reported far fewer workers had been added to US payrolls last month than forecast.
The dollar's slide was stemmed by a 0.5 percent rise in average hourly earnings, which was stronger than forecast and raised the specter of mounting inflation at a time of slower growth.
"What this means is that although the bond markets continue to rally, it still calls into question whether or not the Fed will change their pattern of raising interest rates 25 basis points for August and for September, so that's what really stopped it in its tracks," said Andrew Busch, global foreign exchange strategist at BMO Capital Markets. The dollar pared some of its losses by mid-afternoon in New York, leaving the euro still up nearly 0.3 percent at $1.2814.
The Federal Reserve raised its benchmark federal funds rate last week for a 17th straight time to 5.25 percent, but after the data, interest rate futures reflected a 62 percent chance of another rise at the next policy meeting on August 8, down from a near-80 percent chance before the payrolls report.
Investors had anticipated a much higher nonfarm payrolls number, especially after employment firm ADP this week estimated the private sector added 368,000 jobs in June. A number of Wall Street banks raised their forecasts of net job gains to between 200,000 and 250,000 after the ADP report.
John McCarthy, director of foreign exchange at ING Capital Markets in New York, said it remains difficult to predict the Fed's next move. He said a failure of the euro to make a run at the $1.29 level before the session end may push the pair back to $1.2780, its level before the jobs data. The dollar was down more than 1 percent against the yen at 113.94 yen, above an intraday low of 113.79, but still at its lowest since early June.
The Japanese currency also drew support from expectations that the Bank of Japan will end its zero interest rate policy next week, leaving the euro also down 0.7 percent against the yen at 146.04. The yen, which often trades as a proxy for China's yuan, also gained overnight on talk of plans for an emergency Chinese central bank meeting on an unspecified subject, which markets took as a possible prelude to another yuan revaluation.
The People's Bank of China declined to comment. The euro meanwhile had been firmer against both the dollar and yen earlier in Friday's session, after European Central Bank President Jean-Claude Trichet on Thursday pledged "strong vigilance" against risks to price stability. That comment had markets betting the ECB could lift rates, now at 2.75 percent, at its next meeting on August 3.