By Gertrude Chavez-Dreyfus and Harry Robertson
NEW YORK/LONDON (Reuters) – The U.S. dollar rose on Tuesday after falling overnight to its lowest levels against the euro, sterling and Swiss franc since mid-March, as investors consolidated gains in other currencies ahead of a key nonfarm payrolls report later this week. . .
However, the dollar trimmed its gains against a basket of currencies led by the euro and extended losses against the yen after US job opportunities fell more than expected in April to their lowest levels in more than three years, according to the Survey of Job Opportunities and Labor Turnover. Or JOLTS report.
Job openings, a measure of labor demand, fell by 296,000 to 8.059 million on the last day of April, the lowest level since February 2021.
Market participants focused on the JOLTS data, ahead of Friday's US jobs report, which is expected to show new jobs created of 185,000 in May, up from 175,000 in April.
The JOLTS report followed data on Monday that showed a second straight month of slowdown in manufacturing activity and an unexpected drop in construction spending.
“While the US dollar initially fell on the JOLTS data, it appears to be already recovering and is still on track for daily gains after taking a dip yesterday,” said Helen Giffen, a foreign exchange trader at Monex USA in Washington.
“The Fed has long stated that it is looking at some slowdown in the labor market, and today’s JOLTS reading is a good indicator that the labor market may finally be heading in the direction it wants, so while fewer jobs are opening it is not,” she added. In the grand scheme of things, necessarily good, the Fed might be happy to see it.”
On the other hand, US factory orders rose for the third straight month in April, supported by demand for transportation equipment. The data showed factory orders rose by 0.7%, which is in line with the revised pace in March. Economists polled by Reuters had expected an increase of 0.6% compared to March.
In late morning trading, the index rose 0.2% to 104.25, after falling to its lowest levels since mid-April overnight at 103.99.
The euro, the largest component of the dollar index, fell 0.3 percent to $1.0868.
The yen rises to its highest level in three weeks
On the other hand, the yen rose to a three-week high against the dollar, as Bank of Japan officials warned that they were monitoring the currency closely, and a Bloomberg report said it may soon discuss reducing bond purchases.
Bank of Japan Deputy Governor Ryozo Himeno said on Tuesday that the central bank should be “extremely vigilant” about the impact that yen fluctuations could have on inflation in guiding monetary policy.
Bloomberg said the Bank of Japan will address the slowdown in its bond purchases at its two-day policy meeting next week. That could push yields higher in the coming weeks and could come before interest rate hikes in July, something analysts at TD Securities said they now expect on Tuesday.
Investors are also likely to unload carry trades given Monday's losses in the Indian rupee and Mexican peso following the latest election results, said Alex Loo, a forex and macro strategist at TD Securities in Singapore.
In carry trades, investors borrow in low-yielding currencies such as the yen or Swiss franc to buy higher-yielding currencies such as emerging market currencies.
“As such, the Japanese yen and Swiss franc recorded significant gains during today’s trading session,” Lu said.
The Mexican peso was still lower during the day against the dollar, but not as much as Tuesday when losses were more than 4%. The dollar rose in recent transactions by 0.8 percent to 17.805.
The Indian rupee remained low against the dollar, which last traded 0.5 percent to 83,539 rupees, amid lack of clarity about the performance of the coalition led by Indian Prime Minister Narendra Modi after it lost its absolute majority.
In Britain, the pound sterling also recorded its highest levels since mid-March, at $1.2818, before retreating, falling 0.3% to $1.2777.
Against the Swiss franc, the dollar also fell to its lowest level since March at 0.8971 francs. It decreased in recent trading by 0.5 percent to 0.8989 francs. Data showed that Swiss inflation stabilized at 1.4% on an annual basis in May.
Also affecting currency markets was a drop in oil prices due to investors' concerns about higher supply later in the year amid signs of weak US demand.
The Australian dollar fell 0.7 percent against the US dollar to $0.6642, while the Norwegian krone fell 1.4 percent against the dollar to $10.5778, a sign that commodity currencies are under pressure.
