London - The yen and dollar tumbled after a report last week showed US payrolls grew less than economists forecast, tempering speculation that the Federal Reserve will raise US interest rates this year.
The Australian and New Zealand dollars strengthened against most of their major counterparts as a bounce in commodities and stocks helped the currencies rebound from last quarter’s losses, when signs of a slowdown in China damped demand for resource- related assets.
A gauge of the greenback extended a decline after a report on October 2 showed US wages stagnated last month.
“The way the market is looking at the payrolls numbers is weak enough to diminish the case for higher US rates, but not weak enough to point to a materially weaker economy,” said Adam Cole, London-based head of global foreign-exchange strategy at Royal Bank of Canada.
“They’re positive for risk appetite. Commodity currencies are all stronger, and the yen’s weaker.”
The yen depreciated 0.2% to ¥120.20/$ at 13:35. It dropped for a third day against the euro, sliding 0.4% to ¥135.03. The dollar weakened 0.2% to $1.1234 per euro.
Labour report
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers slid 0.3% to 1 205.13 and touched a two-week low. A Labour Department report on October 2 showed the US economy added 142 000 jobs in September, below the median forecast of 201,000 in a Bloomberg survey of economists. The August reading was revised lower.
Traders see a 34% probability that the Fed will raise rates by December, down from 58% a month ago, according to futures data compiled by Bloomberg. The calculation is based on the assumption that the effective fed funds rate will average 0.375% after liftoff.
Kansas City Fed President Esther George and San Francisco Fed President John Williams are both set to speak later Monday.
“The Fed is on a very slow path to normalization, which should see wider dollar ranges and slower dollar appreciation,” Sam Tuck, a senior currency strategist at ANZ Bank New Zealand in Auckland, wrote in a note.
The currencies of Australia and New Zealand “are still at risk from wider sentiment, but negative domestic drivers are easing, and with them the downtrend.”
Australia’s currency strengthened for a fourth day as the Bloomberg Commodity Index rose 0.4% and stocks in Asia and Europe gained.
Aussie, Kiwi
The Aussie climbed 0.7% to 70.95 US cents after jumping 0.9% over the previous three days. New Zealand’s dollar advanced as much as 1.6% to 65.31c, the highest level since August 25.
“The correction of expectations on the Fed’s monetary policy has helped bolster currencies such as the Aussie and kiwi,” said Masafumi Yamamoto, a senior strategist at Monex in Tokyo.
“Stocks are rising and commodities rebounded on Friday, also helping to underpin these currencies.”