The US dollar is getting slammed after a disappointing jobs report has dampened investors’ hopes of a June interest-rate hike by the Federal Reserve.
The latest jobs report showed that the US economy added 38,000 jobs in May – far fewer than the expected 160,000 gain.
The US hasn’t seen such low positive jobs gains since December 2010 – or, in other words, since the aftermath of the Great Recession.
The jobs report also showed that the unemployment rate fell to 4.7% from 5%, which is partly due to the fact that labor-force participation has dropped to its lowest level this year. Average hourly earnings rose 0.2% month-on-month and 2.5% year-on-year.
Thedollar index, which tracks the greenback against a basket of currencies,is down by 1.6% at 94.02, its lowest level since mid-May.
The major currencies are all up against the US dollar. Here’s the scoreboard as of 10:16 a.m. ET:
- TheJapanese yenis stronger by 1.8% at 106.97 per dollar.The euro stronger by 1.7% against the dollar at 1.1341. The British pound is stronger by 0.8% against the dollar at 1.4543. The Australian dollar is stronger by 1.5% at 0.7334 per dollar. The Canadian dollar is stronger by 1.2% at 1.2948 per dollar.
Tellingly, three big “risk-off” trades stand out: the yen is stronger against the dollar, gold prices are up by 2.7%, and US Treasurys have rallied.
The basic outline here is that betting on yen appreciation is popular during periods of heightened uncertainty. Meanwhile, US Treasurys, considered the safest place investors can park their money, and gold, which is a traditional “end of the world” trade, are also often bought up aggressively by investors in times of stress.
All of this is a huge shift from what everyone was expecting in recent weeks.
Many analysts had been arguing that the US currency had more room to appreciate in this year and the next, given that the Federal Reserve had adopted a slightly more hawkish posture recently and that the US economy has been performing better.
In short, it looks as if everyone is suddenly worried about the US’s outlook after that much-worse-than-expected jobs report.