Dollar slides after moderating July growth in US jobs
By Herbert Lash
NEW YORK (Reuters) -The dollar fell on Friday, paring almost all the week's gains, after slowing U.S. jobs growth in July encouraged hopes of a soft economic landing but higher wages suggested the Federal Reserve may need to keep interest rates higher for longer.
The U.S. economy added fewer jobs than expected last month, but solid wage gains and a decline in the unemployment rate to 3.5% pointed to continued tightness in labor market conditions.
Nonfarm payrolls increased by 187,000 jobs last month, the Labor Department's survey of households showed, less than a Reuters survey of economists who forecast 200,000.
Revisions lower in May and June job growth suggested demand for labor was slowing amid the Fed's hefty rate hikes. But with 1.6 job openings for every unemployed person, the moderation in hiring could indicate companies are failing to find workers.
The softer-than-expected jobs number halted this week's surge in Treasury yields and stopped the dollar's recent climb, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
«There's a short squeeze in the foreign currencies, a bit of a long-dollar liquidation encouraged by a sharp drop in interest rates,» he said, adding «the dollar's upside correction is almost over.»
However, Chandler doubted the market's view of a soft landing ahead of next week's Consumer Price Index (CPI), which he said could show the first year-over-year rise in inflation since June 2022.
The dollar index, a measure of the U.S. currency against six peers, fell 0.537% after climbing on Thursday to 102.84, the highest since July 7.
The trend in the labor market continues to move in the right direction, with two consecutive monthly prints after the
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