London - The dollar is having a rough ride this week, based on the outlook for the world’s largest economy.
A gauge of the US currency extended the losses of the past two days before a private-sector report that’s forecast to show companies created jobs last month at the slowest pace since October.
Later on Wednesday, the Institute for Supply Management will say its non-manufacturing index, which covers almost 90% of the economy, fell in January to the lowest in almost two years, analysts surveyed by Bloomberg predict.
And on Friday, the government’s key employment report will show the US created fewer than 200 000 jobs last month for the first time since September, according to economists.
Intercontinental Exchange’s US Dollar Index has tumbled from an almost two-month high set on January 29, when the Bank of Japan’s decision to implement negative interest rates drove investors into the greenback.
Now, traders are refocusing their attention on the outlook for US borrowing costs, with the prospect of tighter Federal Reserve policy seen to be fading amid an uneven domestic recovery and global market turmoil.
“Whoever said that the dollar may benefit from the Fed hiking rates might be disappointed,” said Roberto Mialich, a senior foreign-exchange strategist at UniCredit SpA in Milan.
“If markets continue to imagine that the pace of the normalization process in the US might be slower than they expected in December, when the Fed kicked off, the dollar will remain sluggish.”
Friday peak
The Dollar Index, which tracks the US currency against six major peers, fell 0.2% to 98.631 as of 7 a.m. New York time. That left it more than 1% lower than the peak on January 29, which was the gauge’s highest level this year.
The dollar dropped 0.5% to ¥ 119.37, and was little changed at $1.0925 per euro.
The probability the Fed will boost its benchmark rate from a range of 0.25% to 0.5% this year has fallen along with oil prices.
There’s a less than 50% chance of an increase by the central bank’s December meeting, while the odds of action by the April gathering have tumbled to 16%, from 56% at the end of last year.