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Greenback weakens as bets on a September rate cut mount

New York

THE US dollar fell broadly on Friday as news of slower US employment growth in July and heightened US-China trade tensions fuelled expectations that the Federal Reserve would cut interest rates again in September.

Nonfarm payrolls increased by 164,000 jobs in July, fewer than the month prior, and wages increased modestly, the Labor Department said.

The report came a day after US President Donald Trump announced an additional 10 per cent tariff on US$300 billion worth of Chinese imports starting Sept 1, leading financial markets to almost fully price in a September rate cut.

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The dollar fell 0.76 per cent against the Japanese yen to its lowest since Jan 3, last at 106.50. Versus the euro it was 0.22 per cent weaker at US$1.1109.

The Swiss franc was 0.83 per cent stronger to 0.9818 franc per dollar. "On balance it is probably a slightly dollar-negative number because I do think that the totality of the report increases the case for a Fed rate cut in September. We're already at the point where we're trading that," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

The US central bank on Wednesday cut its short-term interest rate for the first time since 2008. Fed chair Jerome Powell described the widely anticipated 25-basis-point monetary policy easing as a mid-cycle policy adjustment to protect US expansion from the global economic slowdown happening outside its borders.

Following the cut, the dollar rose in sympathy with US Treasury note prices, but that move had largely been retraced on Friday.

The chance of a September rate cut was 98.1 per cent on Friday afternoon, according to CME Group's FedWatch tool, a large jump from 56.2 per cent a week prior. REUTERS