The dollar has hit a six-week low as new data reveals weaker-than-expected job creation in the United States, raising doubts about further interest rate hikes by the Federal Reserve. The dollar index, which measures the greenback against six major currencies, plummeted by 1.1% to 105.03, hitting its lowest level since September 20. This decline represents the largest single-day drop since July, and for the week, the dollar has fallen by 1.4%, marking its worst weekly performance since July as well.
The latest data shows that nonfarm payrolls increased by only 150,000 jobs last month, with the figures for September revised downward to 297,000 jobs created, down from the initially reported 336,000.
Ronald Temple, Chief Market Strategist at Lazard in New York, commented on the situation, saying, “From my view, the Fed rate hike cycle is over, and this reaffirms the view that the Fed should not hike rates again.” These developments have led to a 0.2% drop in the dollar against the yen for the week, its largest weekly loss since late July.
Earlier in the week, the yen saw a decline following the Bank of Japan’s adjustment to its yield curve control policy, although the changes were not as substantial as market expectations.
In addition to the disappointing job data, another economic indicator points to a slowing economy. The U.S. services sector experienced its second consecutive monthly slowdown in October, with the Institute for Supply Management (ISM) reporting a non-manufacturing PMI of 51.8, down from 53.6 in September. This decline has been ongoing since August when it reached its highest level in six months.
Meanwhile, the euro has gained 1.1% against the dollar, reaching $1.0735, and is on track for a weekly gain of 1.6%, the largest in four months. The British pound has also seen significant gains, rising 1.5% against the dollar to $1.2381, with a weekly gain of 2.4%, the largest since November 2022.
The dollar’s slide is mirrored by a decrease in U.S. Treasury yields, as the benchmark U.S. 10-year yield fell to a five-week low of 4.484%, heading for a retreat of over 30 basis points, the most significant drop since March 2020.
The recent decline in yields was triggered by the U.S. Treasury Department’s announcement of smaller-than-expected increases in longer-dated Treasury supply and Federal Reserve Chair Jerome Powell’s less hawkish stance than anticipated during his press conference after the Fed’s Wednesday meeting. Although Powell left open the possibility of further interest rate hikes, markets are now pricing in less than a 5% chance of a rate increase in December, down from nearly 20% just a day earlier.
The evolving economic landscape and doubts surrounding interest rate hikes have left the financial markets in a state of uncertainty. Investors and analysts continue to closely monitor economic indicators and central bank decisions as they seek clarity on the direction of the U.S. economy and its impact on global markets.
Source: [Reuters]
