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Dollar licks wounds after wage bill shock, attention turns to inflation

By on May 10, 2021 0

TOKYO (Reuters) – The dollar fell to a more than two-month low against its major peers on Monday after a disappointing U.S. employment report prompted investors to moderate rate expectations. higher interest, with the focus now on inflation data this week.

A US dollar bill is seen in front of the stock chart displayed in this illustration taken May 7, 2021. REUTERS / Dado Ruvic / Illustration

The United States has created just over a quarter of the jobs economists predicted last month, and the unemployment rate has risen unexpectedly, spilling cold water on soaring inflation speculation.

The dollar index, which measures the greenback against six rivals, stood at 90.259, after falling to 90.128 for the first time since February 26 earlier in the session.

Notably, the British pound was the biggest winner among the most traded currencies, reaching 0.5% to the highest since February 25, although the leader of Scotland has said that another referendum on independence was inevitable after his party’s resounding electoral victory.

“The choppy downtrend in the USD may continue this week,” Commonwealth Bank of Australia strategist Kim Mundy wrote in a client note, forecasting a break above $ 1.22 for the euro.

“The unexpected slow recovery in the US labor market reinforces the FOMC’s patient approach to monetary policy,” while “the improving global economic outlook is a medium-term drag on the USD.”

The euro rose 0.1% to $ 1.2172, previously hitting its highest since February 26 at $ 1.2177.

The dollar rose to 108.865 yen, but was still not far from its lowest since April 27.

Even before the big paychecks ran out, Fed Chairman Jerome Powell argued that the U.S. labor market was far below what it should be to start talking about declining asset purchases and that a short-term spike in inflation would be transient.

Several Fed officials will have the opportunity to reinforce that message this week, starting with Governor Lael Brainard on Tuesday.

The April Consumer Price Index is expected to be released on Wednesday.

The Australian dollar traded near a more than two-month high at $ 0.7847, while the Canadian loonie rallied to a new 3 1/2 year high at $ 1.2111.

The British pound climbed to $ 1.4058 as the biggest winner among the dollar’s most traded rivals, as traders focused on Britain’s economic recovery rather than the potential for another Scottish referendum, National Australia Bank strategist Gavin Friend wrote in a report.

“The US dollar is falling and the economic recovery in the UK is improving,” Friend wrote.

Any vote for independence is “a long way to go, and in our opinion not something that is lastingly affecting the pound at this time,” with the pair heading towards $ 1.45 by the end of June, a- he declared.

In cryptocurrencies, the ether extended this month’s high, rising more than 5% to an all-time high of $ 4,148.88. The second largest digital token has rallied 41% so far in May.

Biggest rival Bitcoin remained stuck below $ 60,000, consolidating after falling to $ 47,004.20 on April 25 after soaring to a record high of $ 64,895.22 in the middle of this month.

In the meantime, no. Virtual currency dogecoin 4 languished around $ 0.53 after losing more than a third of its price on Sunday, when Elon Musk called the token a ‘scramble’ during his animated spot on the TV show. of “Saturday Night Live” comedy sketches.

“Musk is probably happy to jump on the joke of what is a (coin) meme, but investors are probably in real pain now,” said Justin of Anethan, head of exchange sales in Hong Kong at Diginex, a digital asset exchange. .

“The supply is essentially unlimited (for dogecoin), and therefore unsustainable in the long run. It is a question of who will sell first and who will keep the bags. “

Reporting by Kevin Buckland; Editing by Sam Holmes