Dollar falls after weak US services sector data, gives up post-employment gains
dollar dropped from three-week peaks on Friday in choppy trading after data showed the U.S. services sector slumped in December, negating gains posted after a report showing higher-than-expected nonfarm payrolls last month.
The Institute for Supply Management (ISM) said its non-manufacturing index fell to 50.6 last month, the lowest reading since May, from 52.7 in November.
The services industry accounts for more than two-thirds of the economy. Economists polled by Reuters had forecast the index little changed at 52.6.
More importantly, the ISM's measure of services sector employment plunged to 43.3 last month, the lowest since July 2020 when the economy was reeling from the first wave of the pandemic.
The index was at 50.7 in November.
«The plunge in the ISM services index to a 7-month low in December suggests, at face value, that the economy is sliding into recession,» wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics, in an emailed note after the data.
«But the poor relationship between the surveys and the hard economic data in recent times suggests we should take this latest reading with a pinch of salt.
The dollar index fell 0.4% to 102.0 after hitting 103.10 following the stronger-than-expected jobs report.
That was the highest since mid-December.
On the week however, the dollar gained 0.6%, on pace for its best weekly rise since early December.
Earlier in the session, the dollar got a bounce after data showed the U.S. economy generated 216,000 new jobs in December, exceeding the consensus forecast of 170,000.
