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Dollar falls after soft US payrolls data

The dollar had been rebounding this week following indications of strength in both the US manufacturing and services sectors in April.

However, the below-forecast 88,000 jobs added to payrolls last month clouds the near-term US economic growth prospects and supports the case for an interest rate cut by the Federal Reserve later this year.

“This report has a slight tinge of weakness overall and is lightly tilted in favor of a Fed easing,” which is ultimately negative for the dollar because it erodes the greenback’s yield advantage over other major currencies, said David Gilmore, partner with FX Analytics in Essex, Connecticut.

The euro rose to session highs around $1.3610, up 0.4 percent from late Thursday. A week ago the euro climbed to a record high of $1.3683, according to electronic platform EBS.

The dollar fell 0.4 percent to 119.95 yen. It had on Thursday risen to a two-month high just below 120.50 yen.

Against the Swiss franc, the dollar fell 0.4 percent to 1.2105 francs.

The payrolls report also revised down the amount of jobs created in March by 3,000 and in February by 23,000 -- suggesting the labor market has been slowing alongside the economy.

Although the data in and of itself is modestly dollar negative, some investors may stay on the sidelines ahead of next week’s Federal Reserve policy meeting.

“There has been a material loss of dollar upside momentum, and greater squeeze potential on the downside for euro/dollar, but we may be waiting for the next big event -- the May 9th FOMC meeting -- for real direction,” said Alan Ruskin, chief international strategist with RBS Greenwich Capital.

The dollar has weakened considerably in the past year, falling to 26-year lows against sterling and all-time lows against the euro, mainly because of slowing US economic growth at a time when other major economies are still showing signs of robust growth.

Investors are expecting the Federal Reserve will cut interest rates at least once this year, compared with forecasts for higher rates in the euro zone and Britain among others.

The dollar index slipped 0.3 percent to 81.701 after having traded earlier at its highest since April 17, and up from two-year lows hit earlier this week.

The Australian dollar fell to US$0.8211, and briefly fell below $0.82 for the first time in four weeks after the central bank lowered its forecast for underlying inflation, suggesting rates were on hold for the rest of the year.

The Swedish crown rose briefly against the euro and dollar after the central bank left interest rates steady as expected but said rates need to be raised more than it had forecast in February.