The dollar rallied on Monday, bouncing off a four-week low that it hit on Friday following weaker-than-expected US jobs data.
The dollar index, a measure of the greenback’s value against a basket of its main rivals, climbed 0.2% to 92.19 in early trade in London.
On Friday, the index slumped to a four-week low of 91.95 after non-farm payrolls data showed that far fewer jobs were created in the US during August than had been expected.
Taper expectations fade
The data effectively put the lid on any expectations the US Federal Reserve might announce the imminent beginning of a gradual withdrawal of monetary stimulus in the form of a tapering of its monthly bond asset purchases at this month’s open market committee (FOMC) meeting.
Expectations of a near-term taper announcement had already substantially faded more than week ago, after Fed chair Jerome Powell delivered a dovish speech at the Jackson Hole symposium on 20 August.
Since that date, the dollar index has fallen 1.5% after Powell said that rate increases could still be a long way off – even after it completes its asset purchase programme – depending on the labour market recovery, which he wants to see return to pre-pandemic levels.
Friday’s data, however, showed the jobs market remained some way from those levels. Global investors had been pinning hopes on a monthly reading similar to those of June and July when – in both months – in excess of 900,000 jobs were created. The 235,000 reading in August came as a significant disappointment.
“A September tapering announcement by the Fed is now dead and buried, and the next possible date is November,” said analysts at ING on Monday.
Indeed, ING added, the European Central Bank (ECB) could trump the Fed on tapering at its meeting on Thursday by announcing its own “dovish taper” – easing the pace of its bond buying under its pandemic emergency purchase programme (PEPP).
“The only decision we expect the ECB to take is on the pace of the next quarter’s worth of PEPP purchases, a spike in inflation and recent hawkish comments have raised the stakes,” ING said.
In early London trade, the dollar was up 0.2% to $1.1862 against the euro, and had climbed 0.2% to JPY109.88 versus the yen and 0.2% against the pound to $1.3843.