Dollar on defensive as data show cracks in US jobs market

SINGAPORE: The dollar retreated in early Asia trade on Friday, leading declines among major currencies as investors lacking official data on the U.S. labour market seized upon signs of weakness in private sector surveys.

The dollar index , which measures the greenback’s strength against a basket of six currencies, fell 0.5% to 99.674, reversing its gains so far this month as bets mounted on a cut at the Fed’s next meeting on December 10.

With the U.S. government shutdown postponing the release of the monthly non-farm payrolls report, traders have turned to private sector data showing the U.S. economy shed jobs in October in the government and retail sectors, while cost-cutting and the adoption of artificial intelligence by businesses led to a surge in announced layoffs.

“U.S. Challenger jobs data indicated a spike in U.S. job cuts, suggesting a possible cooling in U.S. labour market conditions,” Westpac wrote in a research report.

Traders ramped up bets on a rate cut even as Chicago Federal Reserve President Austan Goolsbee said on Thursday the lack of official data on inflation during the government shutdown “accentuates” his caution about cutting interest rates further. “When it’s foggy, let’s just be a little careful and slow down,” he told CNBC.

Trading in Fed funds futures implies a 70% chance of a cut at the U.S. central bank’s next meeting, up from a 62% probability a day earlier, according to the CME Group’s FedWatch tool.

Against the yen, the dollar traded at 153.17 yen , 0.1% firmer compared to late U.S. levels after data released on Friday showed Japanese household spending in September rose 1.8% from a year earlier, slightly worse than the median market forecast for a 2.5% rise.

The Australian dollar fetched $0.6479 , while the kiwi traded 0.1% firmer at $0.5635 , both little changed.

The offshore yuan traded at 7.1233 yuan per dollar , unchanged in early Asian trade.

Sterling traded at $1.3135 , flat so far on the day after the Bank of England held interest rates steady on a 5-4 decision, with Governor Andrew Bailey casting the deciding vote. British finance minister Rachel Reeves has told the country’s budget watchdog that a rise in personal taxation is among the “major measures” she is preparing to announce in her budget, The Times reported on Thursday.

The euro was little changed so far in Asia, trading around a one-week high at $1.1550 .