US dollar holds decline as Saudi comments on output freeze sink oil

[WELLINGTON] The US dollar maintained losses versus major peers as trading got under way for the week, with most Asian index futures signaling gains after US economic data failed to spur a readjustment in bets on when the Federal Reserve will next raise interest rates.

The yen held near an almost two-week high versus the greenback after a strong report on American manufacturing melded with mixed jobs data to reaffirm prospects the Fed will take a gradual and cautious approach to boosting borrowing costs.

Futures on indexes from Australia to Japan indicated stocks in the region will track Friday's gains in the US, while copper futures retreated. Oil extended last session's tumble, which wiped out its 2016 gains, after Saudi Arabia backed away from a commitment to freeze crude output.

Odds of the Fed hiking rates by November held around 50 per cent, even as data showed US manufacturing expanded for the first time in seven months and more workers than expected were added to nonfarm payrolls last month, while an increase in the number of people looking for work saw the jobless rate tick up.

Risk assets have rallied amid a pullback in the US dollar after the Fed reduced its outlook for rate increases this year to two from four. The chance of a hike at the central bank's next meeting fell to zero after Chair Janet Yellen reaffirmed the go-slow approach in a speech last week.

"With Yellen cautious, markets are taking her at her word - for the time being at least," Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand Ltd, said in a client note.

"But domestic developments can't be ignored for ever, and the data means the Fed is going to have to at least contemplate further tightening at some stage in the not-to- distant future. Love for the dollar should eventually return, although it may be a few months away yet."

Markets in mainland China, Hong Kong and Taiwan are shut for holidays, while Japan updates on its monetary base. South Korea reports on foreign-direct investment, a manufacturing index for India is due and Australia posts data on retail sales and building approvals ahead of a monetary policy review on Tuesday.

New Zealand's S&P/NZX 50 Index added 0.1 per cent as of 7:35 am Tokyo time, after slipping 0.7 per cent on Friday. Futures on the Standard & Poor's 500 Index lost 0.1 per cent early Monday, following a 0.6 per cent increase in the gauge at the end of last week.

Payrolls in the US grew by 215,000 workers last month, more than the 205,000 predicted by economists, and February's increase was revised to 245,000. The unemployment rate rose to 5 per cent from 4.9 per cent, according to the government data.

"Friday's US labour market report was something of a middling result for markets," Mr Borkin said. "On the one hand it was not really strong enough to suggest inflation pressures are going to run away on the Fed, but on the other, it certainly still showed, together with a rebound in the ISM, that the economy is still performing well overall."

West Texas Intermediate crude slumped 1.1 per cent to US$36.37 a barrel Monday, extending Friday's 4 per cent tumble. Brent was down one per cent to US$38.29 after losing 4.1 per cent.

Middle Eastern equities slid Sunday, with shares in Saudi Arabia dropping to a five-week low, after the kingdom's deputy crown prince said it will only freeze oil production if Iran and other major producers do so. Iran has already said it plans to boost its production after the lifting of sanctions following a deal to curb the country's nuclear program.

"If all countries agree to freeze production, we're ready," Mohammed bin Salman said in an interview with Bloomberg. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door."

BLOOMBERG