Dollar suppressed due to underwhelming U.S. wage growth

Dollar suppressed

The dollar started weak on Monday following an underwhelming rise in wages in January that strengthened expectations that the Federal Reserve will forgo the interest rate hike next month.

The dollar index, which gauges the dollar against a handful of major currencies, went down 0.1 percent at 99.725.

The dollar was still above last week’s low of 112.05 yen trading flat against the yen at 112.56.

The euro traded on the day at $1.0781, going above Friday’s low of $1.0711.

The unemployment rate slightly went up and wage growth disappointed investors despite Friday’s nonfarm payroll report showing a very positive rise in job growth. That implied inflation would not attain a pace that would prompt the U.S. central bank to raise interest rates.

According the CME Group’s FedWatch, after the nonfarm payroll report on Friday, Fed fund futures priced in a less than 10 percent chance of a rate increase in March. There is around more than a 60 percent chance of a June increase.

The Federal Reserve, which recently increased rates in December, said that it expects three rate increases for this year. The Fed’s pace is entirely depended upon the strength of the labor market and President Donald Trump’s attempts at successfully stimulating growth and inflation.

The Federal Reserve can arrange to raise interest rates this year without knowing details of any new U.S. fiscal policies because inflation is going steady and the labor market is looking good said John Williams, President of the San Francisco Federal Reserve.

Kaneo Ogino, director at foreign exchange research firm in Global-info Co. in Tokyo said “Trump's comments sometimes make us puzzled, and we always have to wait for the details to see what he means.”


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