US dollar inches lower as dovish Powell comments offset upbeat jobs data
Fed's Powell says significant progress made on inflation
US job openings rise in May -JOLTS report
ECB's Lagarde says euro zone is advanced on disinflation path
Adds new comment, graphic, updates prices, paragraphs 1-6, 10, 15
By Gertrude Chavez-Dreyfuss
NEW YORK, July 2 (Reuters) -The dollar slipped on Tuesday in thin, choppy trading after Federal Reserve Chair Jerome Powell struck a moderately dovish tone in his comments, suggesting that the U.S. central bank is more than likely to start its easing cycle later this year.
Powell, in a monetary policy conference in Portugal, said the U.S. economy has made significant progress on inflation as it gets back on the disinflationary path. His remarks were viewed as dovish, analysts said.
Comments by the Fed's top official outweighed data showing U.S. job openings increased in May after posting outsized declines in the prior two months. Job openings, a measure of labor demand, rose 221,000 to 8.140 million on the last day of May, according to the Job Openings and Labor Turnover Survey or JOLTS report.
Economists polled by Reuters had forecast 7.910 million job openings in May. Data for April was revised lower to show 7.919 million unfilled positions instead of the previously reported 8.059 million.
"Powell didn't really say anything new, but I would say he was slightly dovish," said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull in Toronto, adding that his remarks helped the dollar push a little lower.
"But I would argue that the JOLTS report is not as strong as it looks on the surface. The April number was revised down and so the market is trying to shake off the JOLTS report. That's why the dollar is not as high as it was initially after the release."
Following the JOLTS report and Powell's comments, U.S. rate futures have priced in a 69% chance of a rate cut in September, up from about 63% on Monday, according to LSEG calculations. The market has also priced in one to two rate cuts in 2024.
In afternoon trading, the dollar index =USD, which measures the U.S. unit against six other currencies, was down 0.1% at 105.71.
BOOST FROM TREASURY YIELDS
The dollar has been recently supported overall by the persistent rise in Treasury yields.
Benchmark 10-year Treasury yields US10YT=RR rose nearly 14 basis points (bps) to 4.479% overnight, with analysts linking the rise to expectations that Donald Trump will win the U.S. presidency, in turn leading to higher tariffs and government borrowing.
On Tuesday, the yield on the 10-year note pulled back, sliding 4.3 bps to 4.435%.
Against the yen, the greenback was flat at 161.48 JPY=EBS. It hit 161.745 earlier on Tuesday, its highest in nearly 38 years, driven mainly by the wide gap in interest rates between the U.S. and Japan.
Japan's finance minister said on Tuesday authorities were vigilant to sharp currency market moves, but stopped short of giving a clear intervention warning.
"The market just doesn't believe it when the Bank of Japan and their monetary officials say that they're monitoring the yen closely," said Silver Gold Bull's Bregar.
Against the euro EURJPY=R, the yen touched a lifetime low of 173.67 on Monday and was just shy of that level on Tuesday, while against the Australian dollar AUDJPY= the yen was near its lowest in 33 years as carry trade remained attractive.
The euro was flat against the dollar at $1.0741 EUR=EBS, showing little reaction to comments on Tuesday from European Central Bank President Christine Lagarde, who was in the same monetary policy forum with Powell. She said the euro zone is "very advanced" on the disinflationary path but there remain "question marks" hanging over the outlook for economic growth.
Euro zone inflation eased last month but a crucial services component remained stubbornly high, fuelling concern that domestic price pressures could stay at elevated levels.
The market is now looking to the second round of French elections during the weekend.
In other currencies, sterling rose 0.3% against the dollar to $1.2683 GBP=D3, but not far from the roughly two-month low hit last week.
The Aussie dollar AUD=D3 was up 0.1% at US$0.6668, with traders weighing central bank minutes, which showed much discussion about whether policy was tight enough to ensure inflation would slow as desired. AUD/
Currency bid prices at 2 July 07:11 p.m. GMT | |||||||
Description | RIC | Last | U.S. Close Previous Session | Pct Change | YTD Pct | High Bid | Low Bid |
Dollar index | =USD | 105.7 | 105.84 | -0.12% | 4.27% | 106.05 | 105.71 |
Euro/Dollar | EUR=EBS | 1.0743 | 1.0741 | 0.03% | -2.67% | $1.0747 | $1.071 |
Dollar/Yen | JPY=D3 | 161.47 | 161.485 | -0.01% | 14.49% | 161.74 | 161.295 |
Euro/Yen | EURJPY= | 1.0743 | 173.39 | 0.05% | 11.47% | 173.6 | 173.09 |
Dollar/Swiss | CHF=EBS | 0.904 | 0.9029 | 0.13% | 7.41% | 0.905 | 0.9028 |
Sterling/Dollar | GBP=D3 | 1.2683 | 1.2651 | 0.27% | -0.32% | $1.2685 | $1.071 |
Dollar/Canadian | CAD=D3 | 1.3678 | 1.3736 | -0.4% | 3.2% | 1.3755 | 1.3675 |
Aussie/Dollar | AUD=D3 | 0.6666 | 0.6661 | 0.11% | -2.21% | $0.6671 | $0.6634 |
Euro/Swiss | EURCHF= | 0.9711 | 0.9696 | 0.15% | 4.58% | 0.9714 | 0.9682 |
Euro/Sterling | EURGBP= | 0.8467 | 0.8488 | -0.24% | -2.32% | 0.8495 | 0.8467 |
NZ Dollar/Dollar | NZD=D3 | 0.6078 | 0.6075 | 0.07% | -3.79% | $0.6082 | 0.6048 |
Dollar/Norway | NOK= | 10.6776 | 10.6492 | 0.27% | 5.35% | 10.721 | 10.6506 |
Euro/Norway | EURNOK= | 11.4706 | 11.448 | 0.2% | 2.2% | 11.5046 | 11.4295 |
Dollar/Sweden | SEK= | 10.5882 | 10.6077 | -0.18% | 5.18% | 10.6685 | 10.589 |
Euro/Sweden | EURSEK= | 11.3752 | 11.3949 | -0.17% | 2.25% | 11.4297 | 11.375 |
World FX rates https://tmsnrt.rs/2RBWI5E
JOLTS hiring and continuing jobless claims https://reut.rs/3L9ls2D
Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Stefano Rebaudo in Milan, Amanda Cooper in London, Tom Westbrook and Ankur Banerjee in Singapore; Editing by David Holmes and Trevor Hunnicutt
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