Saqib Iqbal Ahmed
NEW YORK (Reuters) – The dollar traded slightly weaker against most major currencies on Friday and was on track for its worst weekly performance against the euro this year after mixed data left the Federal Reserve’s expected June interest rate cut on the table.
Nonfarm payrolls increased by 275,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said in its closely watched employment report Friday. Data for January was revised down to show 229,000 jobs created instead of 353,000 as previously reported.
The unemployment rate rose to 3.9% in February after holding at 3.7% for three straight months, data showed.
“The market, I think, was a little concerned that the Fed had backed down from the possibility of a rate cut soon, especially given the recent inflation reports,” said Stuart Cole, chief economist at Equiti Capital.
“Today’s report should provide some optimism that even if the scope of rate easing is not as strong as expected at the beginning of the year, things are still moving in the right direction, allowing the Fed to cut rates this year,” he said .
“At least in the short term, I think the dollar will trade on a softer basis,” Cole added.
The euro fell 0.06% against the dollar to $1.09425. The single currency hit an eight-week high earlier in the session and was up nearly 1% for the week, its best weekly performance against the US dollar since the week ended Dec. 22.
The ECB kept rates at a record high of 4.00% on Thursday while cautiously paving the way for a rate cut later this year, saying it was making good progress in reducing inflation.
The euro strengthened this week as the dollar came under pressure after Federal Reserve Chairman Jerome Powell said he was more confident of cutting interest rates in the coming months.
Speaking on Thursday, Powell said the Fed is “not far off” from the confidence it needs to cut rates. Currencies tend to weaken when central banks cut interest rates.
“(Friday’s data) really confirms what Chairman Powell said this week about the confidence he had in the potential to start a rate-cut cycle this year,” said Lindsay Bell, chief strategist at 248 Ventures in Charlotte, North Carolina.
Meanwhile, the yen rose to a five-week high against the dollar, boosted by reports that the Bank of Japan is enthusiastic about the idea of raising interest rates and is considering a new quantitative monetary policy framework.
Jiji News Agency reported that the Bank of Japan is considering a structure that will show the forecast for upcoming government bond purchases.
Separately, Reuters reported that a growing number of BOJ policymakers could support ending negative interest rates this month as annual wage talks are expected to yield good results this year, four sources familiar with the bank’s thinking said.
Against the yen, the dollar fell 0.68% to 147.05 yen, its weakest since February 2.
“The yen is rising amid growing speculation that the Bank of Japan will buck the trend of global central banks and raise interest rates later this month,” said Kathleen Brooks, research director at XTB.
“In the short term, a strong downtrend appears to be developing and we believe the pair could test 145.00,” she added.
Sterling rose on Friday against weakness in the euro and dollar after signs emerged that the European Central Bank (ECB) and the US Federal Reserve may be closer to cutting rates than the Bank of England (BoE). The pound rose 0.34% to $1.2854 after hitting its highest since late July.
Increasing hopes that interest rates in the US and Europe will begin to fall in June also helped support the risk-sensitive Australian and New Zealand dollars. The price rose 0.09%, while the price rose 0.05%.
In cryptocurrencies, Bitcoin rose 2.77% to $69,207 after hitting an all-time high of $70,175.