Dollar mellowed after wage growth dismay

Dollar mellowed

The dollar started the week on the back foot on Monday, after U.S. data showed a smaller-than-expected rise in wages in January that reinforced expectations the Federal Reserve will refrain from raising interest rates next month.

The dollar index dropped 0.2 percent to 99.688; moving back towards last Thursday’s low of 99.233 which was its weakest since mid-November.

The greenback slipped 0.2 percent against the yen from Friday’s late North American levels to 112.36 yen, retreating towards last week’s late-November low of 112.05.

While the headline figure of Friday's nonfarm payrolls report for January showed a greater-than-expected rise in job growth, the unemployment rate edged up and wage growth was disappointing. That implied inflation would not attain a pace that would prompt the U.S. central bank to raise interest rates soon.

The Fed, which raised rates in December, has forecast three rate increases this year. Whether it sticks to that pace depends on labor market strength as well as if President Donald Trump's stimulus steps succeed in boosting growth and inflation.

While Trump's immigration curbs and renewed sanctions on Iran grabbed most attention, he also on Friday ordered reviews of major banking rules that were put in place after the 2008 financial crisis. Financial markets took this as a signal that looser banking regulation is ahead.

Adding to the smaller-than-expected rise in U.S. wage growth, concerns about the potential impact of Trump's policies also dampened the dollar's outlook. Investors fretted that his protectionist trade policies and statements about other countries' currency manipulations would offset any dollar lift from his stimulus policies and deregulation.

The euro was steady on the day at $1.0782, holding well above Friday's session low of $1.0711. The Aussie fell 0.3 percent to $0.7667, moving away from last week's three-month high of $0.7696.


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