CURRENCIES

Dollar struggles after weak US jobs report

Published Tue, May 11, 2021 · 05:50 AM

London

THE US dollar held at 2½ month lows on Monday as a weak US employment report spurred investors to unwind growing long positions in the greenback, with major rivals including the British pound and Australian dollar testing key levels.

The dollar index, which measures the greenback against six rivals, stood at 90.13, broadly flat on the day, after dipping as low as 90.128 for the first time since Feb 26 earlier in the session.

The greenback's losses in London trading were at odds with the broader markets where equity prices were higher and benchmark US Treasury yields well above Friday's lows.

"There are plenty of key technical levels now broken on the pound and the Aussie, and without support from a Fed unwilling to taper, let alone raise rates, the (US) dollar could have some hard sessions ahead," said John Marley, chief executive officer of forexxtra, a London-based FX consultancy.

The British pound was the biggest gainer among the most-traded currencies, rallying 0.8 per cent above US$1.41, the highest since Feb 25.

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This was despite Scotland's leader saying that another referendum on independence is inevitable after her party's resounding election victory.

Such a referendum requires the backing of the UK government in London and Prime Minister Boris Johnson has ruled out holding another vote, saying the country faces more pressing challenges such as economic recovery from the coronavirus pandemic.

The Australian dollar was another beneficiary of the weakening US dollar trend, with a surge in commodity prices also supporting the Antipodean currency.

The Aussie dollar traded close to a more-than-two-month high at US$0.7884, while the US dollar fell to a fresh 3½-year low of US$1.2111 against its Canadian rival. The euro rose 0.1 per cent to US$1.2170, earlier touching the highest since Feb 26 at US$1.2177.

"The unexpected slow recovery in the US labour market reinforces the Federal Open Market Committee's patient approach to monetary policy", while "the improving global economic outlook is a medium-term weight on the USD", Commonwealth Bank of Australia strategist Kim Mundy wrote in a client note, predicting a break above US$1.22 for the euro.

That view was shared by JP Morgan strategists, who cut their net long US dollar positions against a basket of G10 currencies, notably the euro and the Antipodean currencies. REUTERS

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