THE US dollar dropped to multi-month lows against the euro and yen and fell against most currencies on Friday (Mar 7) after data showed the labour market in the world’s largest economy slowed last month, creating fewer jobs than expected.
The report suggested that the Federal Reserve remained on track to cut interest rates multiple times this year. US rate futures on Friday priced in 78 basis points (bps) of easing this year following the nonfarm payrolls report, or about three rate cuts of 25 bps each, according to LSEG calculations.
The first rate reduction is likely to resume in June.
Fed chair Jerome Powell, in prepared remarks to the University of Chicago School of Business, did not really say anything new, repeating comments during his testimony before Congress and his press conference after the Fed rate decision in January. He said on Friday the Fed will be in no rush to cut rates while it waits for more clarity on how policies of the new Trump administration affect the economy.
The euro, on the other hand, continued its winning ways, poised for its best week in 16 years with a gain of 4.5 per cent against the dollar, boosted by Germany’s game-changing fiscal reforms. It hit another four-month peak of US$1.0888 after the jobs data. It last traded at US$1.0845, up 0.6 per cent.
Against the Japanese currency, the greenback was flat on the day at 147.99 yen, after earlier falling to a five-month low of 146.94 yen.
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The dollar extended its losses after data showed non-farm payrolls increased by 151,000 jobs last month after rising by a downwardly revised 125,000 in January. Economists polled by Reuters had forecast payrolls gaining 160,000 jobs after a previously reported 143,000 rise in January.
The dollar index, which measures the greenback’s value versus six major currencies, has fallen 3.5 per cent during the week, on track for its worst weekly performance since November 2022. It fell 0.4 per cent on Friday to 103.81, after earlier sliding to its lowest since early November.
Natalia Lojevsky, managing director, at CIFC Asset Management, with US$44 billion in assets under management thinks “the softer average hourly earnings is probably a relief for the Fed, who continue to evaluate inflationary pressures both in the labour market and broader economy as a result of the yet uncertain trade and tariff policy.”
Last month’s average hourly earnings, a measure of wage inflation, moderated to a 0.3 per cent rise, from an 0.5 per cent increase in January.
Overall, it has been a volatile week for the currency market, driven mainly by US trade and economic growth uncertainties and a pivotal development in Europe as its largest economy abandoned its fiscal constraints to boost spending and revive growth.
Treasury Secretary Scott Bessent said on Friday that the US economy may slow as it transitions away from public spending towards more private spending, calling it a “detox period” needed to reach a more sustainable equilibrium.
Another reprieve of levies aimed at Mexico and Canada announced by President Donald Trump on Thursday offered little relief to whiplashed markets. The exemption expires on Apr 2 when Trump said he will impose reciprocal tariffs on all US trading partners.
On Friday, Powell said a one-time jump in prices due to tariffs does not need a monetary policy response. “The Fed is going to be very conservative on what they say until we know whether or not the tariffs are tactical or strategic, and if they do turn out to be strategic, they’re still going to wait until the hard data demonstrates both that inflation is low, and the economy is in recession before they really do very much,” said Tony Roth, chief investment officer at Wilmington Trust Investment Advisors.
The greenback rose 0.4 per cent against the Canadian dollar to C$1.4362, but slipped versus the Mexican peso to 20.259 pesos.
In cryptocurrencies, both Bitcoin and Ether fell in the midst of a summit of industry leaders at the White House on Friday, which may focus on Trump’s plans to build a strategic reserve containing Bitcoin and four other coins.
Trump on Thursday signed an executive order to establish the strategic bitcoin reserve, directing the secretaries of Treasury and Commerce to develop “budget-neutral strategies” for acquiring additional bitcoin that have no “incremental costs” on taxpayers.
Bitcoin was last down 2.8 per cent at US$87,030.54, while Ether last changed hands at US$2,150, down 2.6 per cent. REUTERS
