DOLLAR GAINS AFTER AUGUST US JOBS REPORT SHOWS MIXED SIGNALS

Dollar gains: The dollar strengthened in volatile trading on Friday following mixed US employment data for August, which revealed slower-than-expected job growth but suggested a steady deceleration in the labour market. This development likely supports the Federal Reserve’s gradual approach to interest rate cuts.According to the Labour Department’s Bureau of Labour Statistics, nonfarm payrolls rose by 142,000 in August, a slight increase from the downwardly revised 89,000 rise in July. Economists had anticipated a 160,000 job increase, following a previously reported 114,000 gain in July.Initially, the dollar fell against most major currencies after the jobs data release but soon rebounded to trade higher. As a traditional safe haven, the US dollar also gained ground as stocks and other high-risk assets declined.The euro was 0.3 per cent lower against the dollar at $1.1082, having spiked to $1.1155 immediately after the payrolls report. The Dollar Index, which tracks the US currency against six major peers, was up 0.2 per cent at 101.21."The market is grappling with this data, which could justify either a 25 or 50 basis point rate cut," said Gennadiy Goldberg, head of US rates strategy at TD Securities.

Traders weigh rate cut

Traders now estimate a 31 per cent chance that the Federal Reserve will reduce its policy rate, currently set between 5.25 per cent and 5.50 per cent, to a 4.75 per cent to 5 per cent range at its upcoming meeting on September 17-18. This is down from about a 43 per cent chance before the report, with expectations leaning towards a quarter-point reduction."The US economy appears to be slowing down, potentially necessitating a more aggressive response from the Federal Reserve," noted Karl Schamotta, chief market strategist at Corpay in Toronto."While a half-point rate cut at the Fed’s September meeting seems unlikely, today’s data indicates a significant weakening in the labour market, supporting expectations of at least one substantial rate cut in the coming months," he added.Against the Japanese yen, the dollar fell 0.7 per cent to 142.42 yen, marking a fourth consecutive session of losses. The yen has been buoyed by safe haven demand and expectations of imminent rate hikes from the Bank of Japan.

Fed eyes rate cuts

The Federal Reserve appears ready to begin a series of interest rate cuts, as policymakers have noted cooling labour market conditions that could worsen without policy adjustments. Fed Chair Jerome Powell has stressed a shift in focus from combating inflation to safeguarding the job market, suggesting an upcoming easing cycle.The British pound was about 0.4 per cent lower at $1.3131. The Bank of England will meet in two weeks to review monetary policy. Currently, the derivatives market shows minimal expectation of a rate cut this month, but a quarter-point reduction is fully anticipated for November.In the cryptocurrency market, Bitcoin fell about 4 per cent to a one-month low of $53,600, as investors steered clear of riskier assets.(With Reuters Inputs)

2024-09-06T21:13:10Z dg43tfdfdgfd