By Amanda Cooper and Gertrude Chavez-Dreyfuss
LONDON/NEW YORK (Reuters) -The U.S. dollar slid to two-week lows against the yen on Wednesday after data showed private-sector jobs in the world’s largest economy contracted last month, boosting expectations that the Federal Reserve will cut interest rates two more times this year.
Against the euro and sterling, the dollar fell to one-week troughs in the wake of the jobs data.
Data showed that U.S. private employment shrank by 32,000 jobs last month after a downwardly revised 3,000 decline in August, according to the ADP National Employment Report on Wednesday. Economists polled by Reuters had forecast private employment increasing 50,000 following a previously reported 54,000 advance in August.
“The dollar reacting poorly makes sense and especially after the big downward revision for August going from positive 50,000 to a contraction,” said Juan Perez, director of trading at Monex USA in Washington.
“This labor indicator sparks worry that the sluggishness across the economy may be more serious than previously thought. It is one thing to see a slower pace of hiring but another completely more pressuring item that we are experiencing job losses.”
U.S. rate futures have priced nearly 50 basis points of cuts this year following the ADP data, from about 43 bps of easing on Tuesday, with market-implied odds of around 99% for an October rate move, according to LSEG data.
The jobs data followed a mixed reading for the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS, on Tuesday. The report showed U.S. job openings increased marginally in August while hiring declined, consistent with a softening labor market.
The ADP report, jointly developed with the Stanford Digital Economy Lab, has gained more attention from investors seeking fresh clues on the labor market as the Labor Department’s more comprehensive and closely followed employment report for September will not be published on Friday.
The private sector jobs report came amid a U.S. government shutdown, which commenced hours after the Senate rejected a short-term spending measure that would have kept government operations afloat through November 21.
Senate Republican Leader John Thune said the chamber would vote again on the House-passed measure on Wednesday. The Senate is due to convene at 1400 GMT.
In morning trading, the dollar fell 0.8% against the yen to 146.73, after earlier falling to its weakest since September 17. The greenback was flat against the Swiss franc at 0.7966 franc.
The greenback also fell to a one-week low against the euro, which was last up 0.2% at $1.1754.
Sterling also rose to a one-week high versus the dollar, and was last up 0.5% at $1.3512.
The dollar index, which tracks the U.S. currency against six major peers, fell to a one-week trough, and was last down 0.3% at 97.56. The broader markets bore a few hallmarks of safe-haven buying, giving low-yielding currencies such as the Japanese yen a bid, while U.S. Treasuries and gold held firm.
U.S. President Donald Trump warned congressional Democrats on Tuesday that letting the federal government shut down would allow his administration to take “irreversible” actions including closing programs important to them.
The U.S. Labor and Commerce departments said their statistics agencies would halt data releases in the event of a partial shutdown. That includes Friday’s scheduled nonfarm payrolls release, considered key in determining whether a Fed rate cut is likely at the end of this month.
The length of any shutdown may be key for markets, as the Fed’s next policy decision on October 29 remains weeks away.
In contrast, traders are placing a roughly 40% chance that the Bank of Japan will raise interest rates this month. The central bank’s quarterly “tankan” corporate sentiment survey on Wednesday showed confidence among big Japanese manufacturers improved for the second straight quarter and firms maintained their upbeat spending plans.
BOJ officials have tilted more hawkish in recent days, including formerly dovish board member Asahi Noguchi, who said on Monday that the need for policy tightening was increasing more than ever.
Currency
bid
prices
at 1
October
02:11
p.m. GMT
Descript RIC Last U.S. Pct YTD High Low
ion Close Chang Pct Bid Bid
Previous e
Session
Dollar 97.606 97.837 -0.23 -10.03 97.885 97.
index % % 459
Euro/Dol 1.1747 1.1733 0.13% 13.47% $1.177 $1.
lar 9 171
6
Dollar/Y 146.92 147.98 -0.79 -6.7% 148.20 146
en % 5 .59
5
Euro/Yen 172.62 173.57 -0.55 5.76% 173.91 172
% .33
Dollar/S 0.7974 0.7964 0.14% -12.12 0.7987 0.7
wiss % 929
Sterling 1.3504 1.3448 0.42% 7.98% $1.352 $1.
/Dollar 7 343
5
Dollar/C 1.3933 1.392 0.09% -3.11% 1.3937 1.3
anadian 907
Aussie/D 0.6616 0.6614 0.05% 6.94% $0.662 $0.
ollar 9 659
Euro/Swi 0.9367 0.9343 0.26% -0.28% 0.9372 0.9
ss 336
Euro/Ste 0.8698 0.8725 -0.31 5.14% 0.8742 0.8
rling % 693
NZ 0.5822 0.5795 0.49% 4.07% $0.583 0.5
Dollar/D 1 787
ollar
Dollar/N 9.9194 9.9837 -0.64 -12.73 10.002 9.9
orway % % 1 08
Euro/Nor 11.6496 11.7153 -0.56 -1.01% 11.742 11.
way % 652
4
Dollar/S 9.3778 9.4038 -0.28 -14.88 9.4257 9.3
weden % % 68
Euro/Swe 11.0168 11.0381 -0.19 -3.93% 11.064 11.
den % 5 017
(Reporting by Amanda Cooper in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Kevin Buckland in Tokyo; Editing by Jamie Freed, Jacqueline Wong, Ed Osmond and Andrea Ricci )
