The dollar fell toward a three-week low against the yen before a report that’s forecast to show U.S. employers added fewer jobs in May, making it harder for the Federal Reserve to tighten monetary policy.
U.S. job growth slowed to 165,000 new employees in May from 244,000 in April, according to estimates.
The yen rose against all 16 of its most-traded peers as Asian stocks declined after a measure of Chinese corporate activity fell in May. China’s non-manufacturing purchasing managers’ index fell to 61.9 in May from the previously reported 62.5 in April, according to a statement today by the Beijing-based National Bureau of Statistics and the Federation of Logistics and Purchasing. A reading above 50 indicates an expansion.
The dollar fell amid speculation that further signs of economic slowdown will prompt the Federal Reserve to expand quantitative easing, debasing the currency.
“It’s all about risk dynamics and the prospect of a deteriorating global economic environment,” said Jeremy Stretch, London-based head of currency strategy at Canadian Imperial Bank of Commerce. “The major focus is obviously on the non-farm payroll report, where markets have downgraded expectations. We look for risk-off sentiment to predominate into the close, with the dollar losing out to the yen.”
The euro is headed for its longest stretch of weekly gains versus the dollar since March as international officials prepare a second bailout for Greece.
The pound reached a one-month low against the euro as a report showed U.K. services growth slowed for a second month in May. A gauge based on a survey of companies fell to 53.8 from 54.3 the previous month, Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply said today. The median estimate of economists polled by Bloomberg News was for a decline to 54.2.
“We look for renewed underperformance of the pound going forward,” London-based Morgan Stanley analyst Tim Davis wrote in a research note dated yesterday. “The growth outlook remains subdued and the recent economic data flow has disappointed.”
US data starts with the main event for Friday, as at 1230GMT, Non-farm payrolls are expected to rise 190,000 in May, with private payrolls seen up 210,000. The unemployment rate is forecast to fall to 8.9% after rebounding to 9.0% in April. Hourly earnings are expected to
post a 0.2% rise following the 0.1% rise in April, while the average workweek is forecast to hold steady at 34.3 hours for yet another month. However, the labour market data isn't the only major piece of US economic data due Friday, at 1400GMT the ISM non-manufacturing index is expected to rise to a reading of 54.0 in May after falling sharply in April.