Dollar Closes Flat Despite A Jobs Data Led Tumble

(RTTNews) - The dollar finished trading on a flat note during the week ended September 5 despite whipsawing movements over the course of the week. The greenback tumbled on Friday, erasing all gains made till Thursday in the backdrop of a weak job market update from the U.S.

During the past week, the U.S. Dollar inter alia slipped against the euro, the British pound as well as the Australian dollar but held firm against the Japanese yen. The greenback declined also against the Swiss franc and the Swedish krona but strengthened against the Canadian Dollar. The Dollar Index which measures the Dollar's strength against a basket of 6 currencies however closed the week on a flat note.

The Dollar Index closed at 97.77 on September 5, the same level as on August 29, but after ranging between a high of 98.64 on Wednesday and a low of 97.43 on Friday.

The greenback had strengthened at the onset of the week amidst fiscal concerns in many advanced economies.

On Tuesday, data released by the Institute for Supply Management showed manufacturing PMI in the U.S. increasing to 48.7 in August from 48.0 in July, missing market expectations of 49.0. The index also signaled a sixth straight month of contraction.

Data released by the U.S. Bureau of Labor Statistics on Wednesday showed job openings falling to 7.18 million in July from 7.36 million in the previous month. The lowest level since September 2024 was also well below market expectations of 7.4 million.

In data released on Thursday, the ISM Services PMI increased to 52 in August from 50.1 in July. The highest expansion in the services sector in six months beat forecasts of 51.

In response to the economic data releases, the Dollar Index rallied to 98.35 by close on Thursday. However, the dollar tumbled on Friday as weak labor market data reinforced hopes of an emphatic easing by the Fed.

Data released on Friday morning by the U.S. Bureau of Labor Statistics showed additions to non-farm payrolls in August at 22 thousand. This compares with 79 thousand in July and 14 thousand in June. Markets had anticipated an increase of 75 thousand. The unemployment rate increased to 4.3 percent in August from 4.2 percent in July, matching expectations.

Amidst a less-than-expected level of additions to non-farm payrolls in the U.S. and the resurgence in rate cut expectations from the Federal Reserve, the EUR/USD pair rallied 0.28 percent during the week ended September 5. The common currency was also boosted by data showing consumer price inflation rising to 2.1 percent in August, slightly above market expectations of a steady level of 2 percent. From the weekly low of 1.1608 touched on Wednesday, the pair jumped to 1.1761 on Friday. The pair eventually closed at 1.1719, versus 1.1686 a week earlier.

The British pound edged up against the greenback during the week ended September 5 amidst strong Fed rate cut hopes that diverged with the Bank of England's potentially not-very dovish stance. The GBP/USD pair which had closed at 1.3505 on August 29 gained 0.04 percent during the week ended September 5 to close at 1.3510. The weekly trading range was wider, between a low of 1.3332 recorded on Wednesday and a high of 1.3558 recorded on Friday.

The Australian Dollar also rallied 0.24 percent against the U.S. Dollar during the week ended September 5. From the level of 0.6541 recorded on August 29, the pair rallied to close the week ended September 5 at 0.6557. During the week, the pair oscillated between a low of 0.6483 recorded on Tuesday and the high of 0.6590 recorded on Friday. The Australian Dollar was also boosted by data that showed the Australian economy growing 0.6 percent quarter-on-quarter in the second quarter versus 0.3 percent in the previous quarter and surpassing market expectations of 0.5 percent.

The U.S. Dollar however rallied against the Japanese Yen during the week ended September 5 amidst hints of political instability in Japan and political pressures weakening the case for rate hikes by the Bank of Japan. The USD/JPY pair closed the week at 147.41 versus 147.05 a week earlier, registering an increase of 0.24 percent. The pair ranged between the low of 146.77 recorded on Monday and the high of 149.14 recorded on Wednesday.

Given the weak labor market data released on Friday, markets expect the Fed to proceed with a rate cut in September despite consumer price inflation remaining above the Fed's comfort level. Amidst the speculation, the Dollar Index is currently at 97.68 versus 97.77 at close on Friday.

Amidst the Dollar's retreat, the EUR/USD pair has gained 0.10 percent to 1.1731 versus 1.1719 at close on Friday. The GBP/USD pair has added 0.18 percent to 1.3534 versus 1.3510 at the end of the previous week. The AUD/USD pair is at 0.6589 versus 0.6557 at close on Friday. The USD/JPY pair has surged to 147.80 from the level of 147.41 recorded at close on Friday.