Forex: US dollar weakens against basket of currencies after new labor market report

The US dollar is weakening against a basket of major world currencies today. The dollar first rose to its highest level in nearly five months on Monday’s report on manufacturing activity. However, it erased its gains after a new labor market report showed job vacancies held higher in February.

Around 17:50 CEST, the dollar index, which tracks the performance of the dollar against a basket of six leading world currencies, lost 0.2 percent and hovered around 104.77 points. During the day, the dollar index rose as high as 105.10 points, the highest since November 14. The euro strengthened against the dollar by 0.2 percent to 1.0771 EUR/USD. The dollar was down 0.1 percent against the Japanese yen at $151.54/JPY. The euro rose 0.2 percent against the Japanese yen to EUR/JPY at 163.19.

A report from the US Labor Department today showed that the number of job vacancies rose to 8.756 million on the last day of February. That was a bit more than expected.

“Over the past nine months or so, the dollar has actually been following Fed policy expectations – when the likelihood of an earlier rate cut increases, the dollar tends to weaken, and vice versa.” said BNY Mellon strategist John Velis.

Japan’s is only rising today as Finance Minister Shunichi Suzuki reiterated that he is not ruling out any response to erratic currency movements. Japanese authorities intervened in 2022 when the Japanese yen fell to a 32-year low of $152.00/JPY. Last week, the Japanese currency fell to a 34-year low of $151.97/JPY and the government warned of possible market intervention in response. The Japanese yen is weakening despite the Bank of Japan raising interest rates last month for the first time since 2007, Reuters wrote.

Development of the USDX dollar index (1-hour chart – H1):

Development of the currency pair EUR/USD (1-hour chart – H1):

Development of the currency pair EUR/JPY (1-hour chart – H1):

Development of the currency pair USD/JPY (1-hour chart – H1):

Source: Reuters, ČTK, MT4

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