Decline In U.S. Payrolls Dents Dollar

(RTTNews) - An unexpected decline in non-farm payrolls in the U.S. dramatically dragged down rate hike expectations from the Federal Reserve, and with it the U.S. Dollar, during the week ended August 7. The massive weekly decline in crude oil prices that curtailed inflationary fears, also aided the greenback's retreat.

During week ended August 7, the U.S. dollar inter alia declined against the euro, the British pound, the Australian dollar, the Canadian dollar as well as the Swedish krona. It however rallied against the Japanese yen, as well as the Swiss franc. As a result, the Dollar Index which measures the Dollar's strength against a basket of 6 currencies dropped more than a quarter percent on a weekly basis. Here is a quick recap of the dollar's trajectory during the week ended August 7.

JOLTs data release from the U.S. on Tuesday showed job openings decreasing to 7.36 million in June from a revised 7.54 million in the previous month. Markets had anticipated a level of 7.40 million.

Jobs data for July released on Friday by the U.S. Bureau of Labor Statistics showed a decline of 23 thousand in non-farm payrolls, versus a downwardly revised addition of 20 thousand in June. The unemployment rate, which was anticipated to remain steady at 4.2 percent also unexpectedly declined to 4.1 percent.

Brent crude oil futures for October settlement closed trading at $83.55 on Friday, versus $90.12 a week earlier. The unexpected labor weakness caused markets to dial back expectations of an immediate rate hike by the Federal Reserve. Amidst the decline in payrolls as well as the plunge in crude oil prices, rate hike expectations from the Federal Reserve reduced significantly.

According to the CME FedWatch tool that tracks the expectations of interest rate traders, the likelihood of a pause by the Fed in September increased to 55.6 percent on Friday from 32.8 percent on Monday. Fading rate hike expectations weakened the U.S. dollar's strength founded significantly on Fed rate hike fears.

During the past week, the Dollar Index traded between the weekly high of 100.06 recorded on Tuesday and the weekly low of 99.40 touched on Friday. The index eventually closed the week's trading at 99.54, implying a decline of 0.37 percent from the level of 99.91 on July 31. Boosted by the dollar's weakness, the EUR/USD pair rallied 0.27 percent during the week ended August 7. From the weekly low of 1.1500 touched on Monday, the pair climbed to a high of 1.1581 on Friday. The pair eventually closed the week at 1.1559, versus 1.1528 a week earlier.

The British pound edged up 0.07 percent against the greenback during the week ended August 7. The GBP/USD pair which had ended at 1.3482 on July 31 closed trading for the week ended August 7 at 1.3492. The weekly trading range was wider, between a low of 1.3416 and a high of 1.3512, both recorded on Monday.

The Australian Dollar jumped 0.64 percent against the U.S. Dollar during the past week. The AUD/USD pair closed the week ended August 7 at 0.7068 versus 0.7023 recorded a week earlier. During the week, the pair oscillated between a low of 0.6983 recorded on Monday and a high of 0.7079 recorded on Friday.

The U.S. dollar rallied mildly against the Japanese yen during the week ended August 7. The USD/JPY pair closed the week at 157.81 versus 157.58 a week earlier, registering a gain of 0.15 percent. During the week, the pair oscillated between the low of 155.23 recorded on Monday and the high of 158.58 recorded on Friday.

Amidst mixed signals from the U.S. and Iran over the reopening of the Strait of Hormuz lifting crude oil prices, the U.S. dollar has rebounded on Monday. Anxiety ahead of the release of consumer price inflation readings for July on Wednesday and producer price inflation readings for July on Thursday strengthened the dollar's rebound.

The six-currency Dollar Index traded between 99.60 and 99.73 on Monday. It is currently trading at 99.73, implying an overnight jump of 0.19 percent from Friday's closing level of 99.54.

The EUR/USD pair is currently trading 0.08 percent lower at 1.1549 versus 1.1559 on Friday. The GBP/USD pair is currently trading near 1.3498 versus 1.3492 on Friday, implying a gain of 0.04 percent. Second quarter GDP updates are due from the U.K. on Thursday.

The AUD/USD pair is currently trading 0.08 percent lower at 0.7062 versus 0.7068 on Friday. The Reserve Bank of Australia is expected to maintain rates steady at its meeting on Tuesday.

The USD/JPY pair is now trading 0.68 percent higher at 158.87 as compared with the level of 157.81 recorded at the end of the previous week.