Dollar falls after U.S. nonfarm payrolls report, tariffs kick in

NEW YORK (Reuters) – The dollar hit three-week lows on Friday after data showed the U.S. economy created more jobs than expected in June, but a closely-watched inflation gauge – wage growth – rose less than forecast and the unemployment rate increased.

FILE PHOTO: A U.S. Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration/File Photo

The greenback had already weakened earlier on Friday as the United States and China imposed tariffs on each other’s imports, but the currency’s fall was muted as investors waited for the jobs report.

U.S. nonfarm payrolls advanced by 213,000 jobs last month, the Labor Department said. Data for April and May was revised to show 37,000 more jobs created than previously reported.

The unemployment rate, however, rose to 4.0 percent from an 18-year low of 3.8 percent in June, while the average hourly earnings rose five cents, or 0.2 percent in June after increasing 0.3 percent in May.

“The dollar is coming off because there is a big focus on the earnings number and in the short-term it takes some pressure off rates,” said Steven Englander, head of G10 FX and North American macro strategy, at Standard Chartered in New York.

“We have seen 10-year rates go down by 2 basis points. The market looks at this and says this is not a particularly dollar friendly number in the very short-term, but for the economy it is a great number,” he added.

In mid-morning trading, the dollar index was down 0.5 percent at 94.008 .DXY. Against the yen, the dollar slid 0.2 percent to 110.50 JPY=, while the euro rose 0.6 percent to $1.1759 EUR=.

Fed funds futures priced in a 77 percent chance of a September rate hike, down from 80 percent before the jobs data.

With U.S. payrolls out of the way, investors focused on the trade conflict between the world’s biggest economic powers as U.S. tariffs on $34 billion worth of Chinese goods came into effect.

Investors are anxious to know whether the latest tariffs were a continuation of tit-for-tat measures or an escalation between the two countries which could cause volatility in global financial markets.

“Markets are concerned that despite assurances to the contrary, China may use its currency to hurt the U.S. as it cannot implement a like-for-like retaliation,” said Tom Milson, executive Director at GWM Investment Management In London.

China’s yuan was 0.1 percent weaker at 6.6480 per dollar CNY=CFXS but still some distance from Tuesday’s 11-month low of 6.7204. The yuan had retreated amid trade concerns before pulling back on assurances by China’s central bank.

Reporting by Gertrude Chavez-Dreyfuss, Editing by Franklin Paul and Susan Thomas


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