[NEW YORK] The dollar weakened toward an 18-month low against the yen after data showed US jobs growth trailed forecasts, adding to speculation Federal Reserve policy makers will stick to a gradual pace as they look to raise interest rates.
The decline comes as hedge funds and other large speculators increased wagers on dollar weakness after turning bearish on the currency for the first time since 2014 last month. The greenback strengthened versus currencies of commodity-exporting nations as Thursday's rally by the Australian, Canadian and New Zealand dollars ran out of steam.
"It's a pretty weak report," said Lee Ferridge, the Boston- based head of macro strategy for North America at State Street Global Markets. "We'll see the dollar stay under pressure against euro and yen. But it's not going to be a dramatic move, it's going to be more of a grind."
The greenback's retreat in 2016 has eroded more than half its 9 per cent surge last year, complicating the task of central banks around the world that need weaker currencies to boost their economies.
The dollar fell for a third straight month in April, the longest stretch since before it embarked on a 20 per cent rally in July 2014, on speculation the Fed will take a slower path to raising rates as it factors in headwinds from slowing global economic growth.
The dollar weakened 0.6 per cent to 106.63 yen of 11:42 am in New York, after reaching the lowest level since October 2014 on May 3. The Bloomberg Dollar Spot Index, which tracks the currency versus 10 peers, was little changed.
Labor Department data showed US employers added fewer workers in April than projected.
Nonfarm payrolls increased by 160,000 last month, versus estimates for a gain of 200,000 in a Bloomberg survey of economists.
"It's dollar negative," said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York. "Regardless of what's happening right now, the dollar's probably going to trade on the back foot today."
The greenback slumped as much as 0.7 per cent on Oct 2 when payrolls fell 58,000 short of forecasts as traders scaled back expectations for Fed rates. The Fed lifted its target rate by 0.25 percentage point in December after holding it near zero for seven years, and policy makers have forecast two more increases this year.
Forecasters expect the dollar to strengthen to US$1.10 per euro and 115 yen by year-end.