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FOREX-Dollar languishes at 10-week lows after weak jobs report

05/10/2021 12:27
FOREX-Dollar languishes at 10-week lows after weak jobs report

New throughout, updates prices, market activity and comments

By Kate Duguid and Saikat Chatterjee

- The dollar held at 2-1/2 month lows on Monday as a weak U.S. employment report spurred investors to ditch the U.S. currency, pushing major rivals including the British pound and Australian dollar higher.

The dollar index =USD, which measures the greenback against six rivals was last at 90.051, down 0.11% on the day, its lowest since Feb. 25. Yields on Treasuries with mid-range maturities - between five- and 10-years - were also lower on Monday morning, reflecting expectations the Federal Reserve will maintain its dovish monetary policy for the next few years. nL1N2MU16D

The dollar was lower, not only because of the prospect of a slower U.S. economic recovery, but also because the Fed's stimulative policies - including its $120 billion a month in asset purchases - are expected by some to increase inflation and therefore lower the value of the dollar.

"The dollar suffered the latest in a string of second-quarter setbacks after April’s jobs report Friday showed a sharp slowdown in hiring and a surprise uptick in unemployment. The data supported the Fed’s low interest rate stance and bolstered conviction in the central bank tapering stimulus later rather than sooner," wrote Joe Manimbo, senior market analyst at Western Union Business Solutions.

Manimbo said that U.S. consumer price data on Wednesday and retail sales Friday will share the spotlight this week.

The United States created a little more than a quarter of the jobs that economists had forecast last month and the unemployment rate unexpectedly ticked higher, the Labor Department reported on Friday. nL1N2MT2XD

"The more erratic the recovery on the U.S. labour market, the longer the Fed will take to consider rate steps," Commerzbank strategists said in a daily note.

The British pound GBP=D3 was the biggest gainer among the G10 currencies, rallying 1.19% on Monday to $1.415, the highest since Feb. 25. This was despite Scotland's leader saying that another referendum on independence is inevitable after her party's resounding election victory.

Such a referendum requires the backing of the UK government in London and Prime Minister Boris Johnson has ruled out holding another vote, saying the country faces more pressing challenges such as economic recovery from the coronavirus pandemic.

The Australian dollar was another beneficiary of the weaker dollar. A surge in commodity prices also supported the Antipodean currency. The Aussie dollar AUD=D3 was also at its highest since Feb. 25 and was last trading 0.38% higher at $0.788.

The euro EUR=EBS was last 0.06% higher at $1.217, having earlier touched its highest since Feb. 26 at $1.218.

(Reporting by Kate Duguid and Saikat Chatterjee; Editing by David Gregorio)

(([email protected]; +646-223-6118; Reuters Messaging: [email protected]@thomsonreuters.net))