Dollar Rally Cools as Doubts About U.S. Growth Increase
The dollar tumbled against the euro and other developed-market currencies Thursday as investors exited some of their largest bets in anticipation of large price swings tied to the Good Friday holiday.
The euro climbed 1.1% to $1.0880, a three-day high. The WSJ Dollar Index, which compares the dollar's value against a basket of 16 currencies, slipped 0.5% to 87.26, on pace to fall for a second day.
The dollar continues to struggle to regain its footing against rivals as investors have turned cautious on the outlook for the U.S. economy over the first three months of 2015 and the Federal Reserve's intentions for interest rates. Consumption and manufacturing data have mostly disappointed so far in 2015, sparking fears that the U.S. central bank would delay raising interest rates until late this year.
The U.S. labor market has been a standout, posting 12 consecutive months of gains of 200,000 or more jobs. On Friday, the Labor Department is expected to announce that the U.S. added 248,000 jobs last month.
But Friday is also a holiday in many parts of the world, and investors appear to be concerned about the prospect of fewer traders around for the release of such important U.S. data.
"I would expect volumes and liquidity to be low, and the potential for outsize [currency price] moves to be high," said Aroop Chatterjee, chief currency quantitative strategist at Barclays.
The Fed watches numbers for U.S. jobs and inflation to gauge the economy's health and decide when to increase interest rates from near zero. Investors would likely move into the dollar when the Fed tightens credit, as that would boost returns on assets denominated in the currency.
Second-tier gauges of the labor market have provided mixed signals this week. Initial jobless claims fell more than expected to 268,000 for the week ended March 28, but a report by payroll processor Automatic Data Processing Inc. and forecasting firm Moody's Analytics said the U.S. economy added just 189,000 jobs in March, instead of the 225,000 that economists had expected.
"The euro benefited from this week's batch of generally soft U.S. economic data and the resulting pullback in the dollar," Omer Esiner, chief market analyst at the currency brokerage Commonwealth Foreign Exchange, Inc., wrote in a research brief. "A weak payrolls report [Friday] could further support the euro over the near term."
In other trade, the dollar traded flat against the yen, at Yen119.74.