By Chibuike Oguh
NEW YORK (Reuters) -The U.S. dollar extended losses on Wednesday against major currencies, including the yen, Swiss franc, and euro, after economic data showed weakening labor demand, strengthening market hopes for an upcoming Federal Reserve interest rate cut.
U.S. Labor Department data showed on Wednesday that job openings, a measure of labor market demand, fell more than expected to 7.181 million in July. Economists polled by Reuters had expected 7.378 million job openings in the JOLTS data.
With the Fed focused on the jobs market, the U.S. dollar will continue weakening materially if data continues to show deterioration in labor market conditions, said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey.
“Between (Fed Chair Jerome) Powell’s dovishness at Jackson Hole regarding the job market and the previous non-farm payrolls being weak and today’s JOLTS being weak, and if Friday’s jobs number is weak, it’s a big dovish dynamic going on. It’s very hard to see any options at all, especially given what’s going on politically with the Fed right now with the current U.S. administration,” Epstein said.
The dollar erased earlier gains against the yen and Swiss franc following the data. It weakened 0.2% to 148.04 against the Japanese yen and dropped 0.11% to 0.803 against the Swiss franc.
The euro added to its gains against the dollar. It was last up 0.34% at $1.1672.
“I think it’s just a confluence of factors that kind of coincidentally led to some risk being taken off the table, but ultimately, where we are now isn’t dramatically different from where we’ve been over the last couple of weeks,” Epstein said.
U.S. Treasury yields fell after the jobs data. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 4.6 basis points to 3.613%. The yield on benchmark U.S. 10-year notes fell 5.6 basis points to 4.221%.
“I think everybody is trying to maintain their positioning heading into Friday’s jobs number,” Epstein said. “I think the focal point now is the jobs market.”
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.36% to 98.047.
The British pound gained against the dollar following a selloff in government bond yields. In the gilt market, Britain’s 30-year borrowing costs rose to their highest levels since 1998.
Sterling strengthened 0.38% to $1.3442.
The euro was down 0.24% against the pound to 0.86795.
The 30-year Japanese government bond yield hit record highs on Wednesday, further pressuring the yen. The Japanese ruling party’s Secretary-General Hiroshi Moriyama, a close aide to Prime Minister Shigeru Ishiba, announced he intended to resign.
Spot gold hit an all-time high of $3,567.16 amid the selloff in government bonds. In cryptocurrencies, bitcoin gained 0.78% to $112,288.58.
(Reporting by Chibuike Oguh in New YorkEditing by Nick Zieminski, Rod Nickel)
