By Ray Wee
SINGAPORE (Reuters) – The dollar remained in a narrow range on Monday while the yen pared some safe-haven gains as investors remained undecided about the size of a U.S. Federal Reserve interest rate cut expected later this month and looked to U.S. inflation data due this week for further clues.
The highly anticipated U.S. jobs report released on Friday failed to give traders a clear answer on the question of whether the Fed will deliver its usual 25 basis points interest rate cut or a bigger 50 basis points cut when it meets next week.
Payrolls grew more slowly than expected in August, but the unemployment rate fell and wage growth held steady, suggesting the U.S. labor market is cooling, but not fast enough to cause panic over the economic growth outlook.
Currencies steadied and remained broadly range bound in early Asian trading after some fluctuation following Friday's nonfarm payrolls data.
After rising 2.73% last week, the yen fell 0.26% last week to 142.65 yen per dollar as risk aversion swept the market.
The bank had little reaction to data released on Monday showing Japan's economy expanding at a slightly slower pace in the April-June quarter than initially thought, mainly due to downward revisions to corporate and personal spending.
The euro rose 0.03% to $1.1089, while the pound rose 0.06% to $1.3138.
Against a basket of currencies, the dollar was little changed at 101.21.
“The Fed is at a crossroads,” said Boris Kovacevic, global macro strategist at Convera L.P. “With mixed signals from the labor market, it's unlikely the Fed will cut rates by 25 or 50 basis points just yet.”
Fed policymakers said on Friday that the labor market downturn risks worsening without a policy shift, and signaled they are ready to begin a series of rate cuts at their Sept. 17-18 meeting.
Futures markets are indicating a 35% chance of the Fed cutting interest rates by half a percentage point next week, with Wednesday's U.S. inflation report being the next major economic indicator that could change market pricing.
“While worsening data could mean further significant cuts towards the end of the year, our baseline remains a 25 basis point cut in September, with further easing at this pace likely in November and December,” said David Doyle, head of economics at Macquarie Bank.
Elsewhere, the Australian dollar rose 0.07% to $0.6675 after falling more than 1% to its lowest in nearly three weeks on Friday.
The New Zealand dollar was flat at $0.6175, not far from Friday's two-week low.
(Reporting by Ray Wee and Sri Navaratnam Editing)
