CURRENCIES: Dollar Weakens Against European Rivals As Job Report Concerns Grow
Euro edges up as ECB minutes reveal talk of removing easing bias
The U.S. dollar mostly slipped against leading rivals Thursday as concerns about a weaker-than-expected U.S. jobs report grew.
The greenback failed to build on gains from a day earlier when Federal Reserve meeting minutes suggested that reducing the massive balance sheet that was part of the central bank's economy-juicing policy may start as soon as September.
The ICE Dollar Index , which measures the greenback against a basket of six rival currencies, fell 0.5% to 95.818. The dollar, which fell against its European rivals and was flat against its Japanese counterpart, stayed near its two-month high.
The ICE dollar index last week closed out 2017's second quarter with its worst quarterly loss since September 2010. It was pressured by hawkish comments from the heads of the European Central Bank and the Bank of England, which lifted their respective currencies relative to the dollar.
Doubts about President Donald Trump's pro-growth agenda becoming a reality have also clipped the greenback's upside.
See:Dollar bulls have a lot to worry about in second half of 2017 (http://www.marketwatch.com/story/dollar-bulls-have-a-lot-to-worry-about-in-second-half-of-2017-2017-06-29)
Since 2009, the Fed had bought government bonds, swelling its balance sheet to $4.5 trillion during quantitative-easing programs to stimulate the economy. By gradually reducing the balance sheet by not reinvesting the proceeds (http://www.marketwatch.com/story/fed-might-start-balance-sheet-drawdown-in-september-fomc-minutes-hint-2017-07-05) and letting maturing bonds expire, the Fed can effectively tighten monetary policy.
Analysts believe that reducing the balance sheet will push borrowing rates and the dollar higher, but possibly in a less aggressive way than an outright rate increase.
An indication of a slowing in hiring, however, weighed on the dollar Thursday. In June, employers added 153,000 jobs (http://www.marketwatch.com/story/private-sector-job-growth-throttles-back-in-june-adp-says-2017-07-06), according to payroll processor ADP, below the expected 180,000. Investors are worried that Friday's jobs report will similarly underperform, placing pressure on the greenback, said Alfonso Esparza, senior currency strategist at OANDA.
"Investors are very laser focused on the jobs report," Esparza said in an interview.
Esparza said concerns about Trump's ability to pass pro-growth policies and a perception of diminished American leadership in global affairs are also weighing on the dollar.
The dollar had strengthened slightly against the euro, the yen and emerging-market currencies midweek, as geopolitical tensions escalated ahead of the Group of 20 summit (http://www.marketwatch.com/story/white-house-says-trump-putin-to-meet-at-g-20-summit-on-friday-2017-07-04) in Germany. On Tuesday, North Korea successfully launched its first ballistic missile capable of reaching parts of the U.S (http://www.marketwatch.com/story/north-korea-claims-successful-test-firing-of-an-icbm-2017-07-04).
Trump said Thursday he is considering "some pretty severe things" in response to North Korea's continued efforts to develop nuclear weapons (http://www.marketwatch.com/story/trump-considering-pretty-severe-things-over-north-korea-threat-2017-07-06) that can reach the U.S.
The euro was fetching $1.1419 compared with $1.1351 late Wednesday. The euro climbed after the release of European Central Bank minutes, which showed the panel discussed removing its easing bias at the June meeting, but ultimately decided to maintain its stance.
Elsewhere, the pound gained to $1.2970 versus $1.2933 late Wednesday as investors continued to weigh mixed data that complicate Bank of England efforts to raise record-low interest rates for the first time in 10 years.
Read:Will the Bank of England's 10-year hiatus on rate hikes end soon? What analysts say (http://www.marketwatch.com/story/will-the-bank-of-englands-10-year-hiatus-on-rate-hikes-end-soon-what-analysts-say-2017-07-05)
The pound has weakened somewhat this week as purchasing-managers index surveys have pointed to a softening economy, but it is still only around a cent away from nine-month highs hit against the dollar in May.
Morgan Stanley wrote in a note to clients that despite data pointing to weakness following June's parliamentary elections, they were "loving" sterling.
"Our sterling optimism finds its sterling in what we call 'Brexit economics' and the [Bank of England] reconsidering [pound] weakness and its impact on the economy," they wrote. "Sterling weakness has undermined living standards, and with inflation above the BoE's 2% target and its own staff projections, stabilization should now be on the BoE's agenda. Talking up rate expectations is a sufficient tool to reach this target."
Against the yen , the dollar traded near two-month highs, fetching Yen113.19, compared with Yen113.26 late Wednesday.
(END) Dow Jones Newswires
July 06, 2017 16:20 ET (20:20 GMT)