Rebound In U.S. Payrolls Limits Dollar's Decline

(RTTNews) - A robust job market update from the U.S. on Friday limited the dollar's decline in the wake of dovish comments from a Fed official. Data showing a larger-than-expected addition to non-farm payrolls in the U.S. caused markets to raise expectations of a Fed rate hike.

Fed rate hike bets had suffered following comments from Fed Governor Christopher Waller about giving disinflation a chance.

During the week ended September 4, the U.S. dollar inter alia declined against the euro, the Australian dollar, the Japanese yen, the Canadian dollar as well as the Swedish krona. It however edged up against the British pound and the Swiss franc. As a result, the Dollar Index which measures the Dollar's strength against a basket of 6 currencies dropped more than half a percent on a weekly basis.

Here is a quick recap of the dollar's trajectory during the week ended September 4.

The U.S. dollar opened the week on a firm note, bolstered by hawkish comments on Friday from Fed Chair Kevin Warsh at the Jackson Hole symposium. JOLTs data released by the U.S. Bureau of Labor Statistics on Tuesday showed that job openings increasing to 7.27 million in July from a downwardly revised 7.18 million in June. Markets had anticipated a slightly higher level of 7.30 million. PMI readings released during the week revealed a mixed picture, with a lower-than-expected reading in Manufacturing and a higher-than-expected reading in Services.

Data released on Wednesday showed private businesses in the U.S. adding 38 thousand jobs in August versus an upwardly revised 46 thousand in July. The lowest level since January came in below forecasts of 47 thousand.

However, Federal Reserve Governor Christopher Waller's comments on Thursday, hinting at pausing interest rate hikes if inflation data improved significantly, toned down rate hike expectations from the FOMC scheduled for September 16.

The dollar's decline that followed was however halted by the robust payrolls data release. Data released by the U.S. Bureau of Labor Statistics on Friday showed an addition of 162 thousand to non-farm payrolls in the month of August, much higher than the upwardly revised level of 21 thousand additions in July. Markets had anticipated an addition of 56 thousand only. The unemployment rate however remained steady at 4.1 percent in line with expectations.

In addition to the above, the greenback's trajectory during the week was also impacted by the easing in bond yields as well as the sharp rebound in the Japanese yen. The Dollar Index traded between the weekly high of 99.72 recorded on Tuesday and the weekly low of 98.83 touched on Thursday. The index eventually closed the week's trading at 99.18, implying a decline of 0.52 percent from the level of 99.70 on August 28.

Boosted by the dollar's weakness, the EUR/USD pair rallied 0.25 percent during the week ended September 4. From the weekly low of 1.1566 touched on Wednesday, the pair climbed to a high of 1.1643 on Thursday. The pair eventually closed the week at 1.1614, versus 1.1585 a week earlier. Flash inflation readings for August released on Tuesday showed annual inflation rising as expected to 3.3 percent, from 2.9 percent in July.

The British pound edged down 0.09 percent against the greenback during the week ended September 4. The GBP/USD pair which had closed at 1.3535 on August 28 closed trading for the week ended September 4 at 1.3523. The weekly trading range was wider, between a high of 1.3567 recorded on Tuesday and a low of 1.3473, recorded on Wednesday.

The Australian dollar jumped 0.57 percent against the U.S. dollar during the past week. The AUD/USD pair closed the week ended September 4 at 0.7203 versus 0.7162 recorded a week earlier. During the week, the pair oscillated between a low of 0.7121 recorded on Wednesday and a high of 0.7216 recorded on Friday. Second quarter data released during the week showed a GDP growth of 0.4 percent. Markets had expected a steady reading of 0.3 percent.

The U.S. dollar plunged against the Japanese yen during the week ended September 4 amidst mounting bets of a rate hike by Bank of Japan in the next review. The USD/JPY pair closed the week at 156.25 versus 160.07 a week earlier, registering a loss of 2.39 percent. During the week, the pair oscillated between the high of 160.40 recorded on Wednesday and the low of 155.29 recorded on Friday.

Amidst anxiety ahead of inflation data releases, the six-currency Dollar Index traded between 98.72 and 99.02 on Tuesday. It is currently trading at 98.82, implying an overnight drop of 0.36 percent from Friday's closing level of 99.18.

Ahead of the European Central Bank's interest rate decision on Thursday, the EUR/USD pair is currently trading 0.03 percent higher at 1.1626 versus 1.1614 on Friday.

The GBP/USD pair is currently trading near 1.3560 versus 1.3523 on Friday, implying a gain of 0.16 percent. On the horizon for the pound are updates to GDP for the month of July.

The AUD/USD pair is currently trading 0.12 percent higher at 0.7227 versus 0.7203 on Friday. Amidst strong expectations of a looming rate hike by Bank of Japan, the USD/JPY pair is now trading 0.34 percent lower at 153.83 as compared with the level of 156.25 recorded at the end of the previous week.