Dollar Falls as Jobs Data Push Out Rate-Hike View

By Saumya VaishampayanMarketWatch

The dollar fell against the yen Friday after the employment report showed the U.S. added fewer jobs in March than had been expected, prompting some traders to delay expectations for when the Federal Reserve could hike rates.

The U.S. created 192,000 jobs last month and the unemployment rate remained at 6.7%, according to Labor Department data. Economists polled by MarketWatch had expected gains of 200,000 jobs. The report revised higher employment gains for February and January by 37,000 jobs in total.

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The dollar (USDJPY) fell to Yen103.25 from Yen103.93 late Thursday, moving in step with a drop in the benchmark 10-year Treasury (10_YEAR) yield.

The report was "not so strong to stoke fears that the Fed will accelerate the normalization of policy," said Richard Franulovich, chief currency strategist for the northern hemisphere at Westpac Banking Corp.

Positive economic data support the Federal Reserve's current plan to remove its stimulative bond purchases, which were cut by another $10 billion at its March meeting. The bond buys are on track to come to a close by year-end, setting up speculation about when the Fed could hike rates, which would boost the dollar. Expectations for the first rate hike were pushed out by a meeting in the wake of the jobs report.

Still, the data were consistent with a recovering economy, analysts said. The participation rate rose to its highest level since September and every industry except manufacturing added jobs in March.

"We did see fairly decent job growth," said Aroop Chatterjee, a foreign-exchange strategist at Barclays. In general, data early this year suggested the job-market gains had been weighed down by harsh winter weather. "These distortions have faded and we're going back to the trend we saw in the latter part of 2013," he said.

The euro (EURUSD) fell to $1.3701 from $1.3719 late Thursday, marking the lowest level since Feb. 26, according to FactSet. The euro had dropped below $1.37 after a German newspaper reported the European Central Bank had modeled one trillion euros of bond purchases. ECB Vice President Vitor Constancio reportedly said Friday there was no discussion of how exactly quantitative easing could be implemented.

ECB President Mario Draghi said Thursday officials had talked about quantitative easing, adding to expectations that the central bank could take unconventional steps to battle falling inflation.

"The bottom line is, as of yesterday, Draghi made very clear that quantitative easing is a policy option for the ECB. That's effectively breaking a taboo," said Franulovich. The euro could fall as low as $1.35 in the coming weeks, he added.

The ICE dollar index (DXY), which pits the greenback against six rivals, edged down to 80.432 from 80.454 late Thursday. The WSJ Dollar Index , an alternate gauge of dollar strength, fell to 73.48 from 73.66.

The British pound (GBPUSD) fell to $1.6579 from $1.6599 in the prior session. The Australian dollar (AUDUSD) rose to 92.87 U.S. cents from 92.32 U.S. cents.