By Gertrude Chavez-Dreyfuss and Harry Robertson
NEW YORK/LONDON (Reuters) – The U.S. dollar rose on Tuesday after falling overnight to its lowest against the euro, pound and Swiss franc since mid-March as investors consolidated gains in other currencies ahead of key non-farm payrolls data due later this week.
However, the dollar pared its gains against a basket of currencies led by the euro and extended its losses against the yen after U.S. job openings fell more than expected in April to the lowest level in more than three years, according to the Job Openings and Labor Turnover Survey (JOLTS) report.
The number of job openings, an indicator of labor demand, fell by 296,000 to 8.059 million at the end of April, the lowest level since February 2021.
Market participants were keeping a close eye on JOLTS data ahead of Friday’s U.S. employment report, which is expected to show new employment in May rising to 185,000 from 175,000 in April.
The JOLTS report follows data from Monday that showed a second straight month of slowing in manufacturing activity and an unexpected decline in construction spending.
“The U.S. dollar initially fell following the JOLTS data but appears to have already recovered and is still on an intraday upward trajectory after yesterday’s sharp drop,” said Helen Given, a forex trader at Monex USA in Washington.
“The Fed has long said it expects a softening labor market. Today’s JOLTS numbers are a good sign that the labor market may finally be moving in the direction the Fed wants. So while a decline in job openings is not necessarily a good thing in the big picture, the Fed may be happy about it,” she added.
Meanwhile, U.S. manufacturing orders rose for a third straight month in April, boosted by demand for transportation equipment. The data showed manufacturing orders rose 0.7%, in line with a revised reading for March. Economists polled by Reuters had expected a 0.6% increase from March.
In late morning trading, the dollar index was up 0.2% at 104.25, having fallen to 103.99 overnight, its lowest level since mid-April.
The euro, the dollar index’s largest component, fell 0.3% to $1.0868.
Yen rises to highest in three weeks
Meanwhile, the yen rose to a three-week high against the dollar after Bank of Japan officials warned they were keeping a close eye on the currency and Bloomberg reported the bank could soon discuss tapering its bond purchases.
Bank of Japan Deputy Governor Ryozo Himino said on Tuesday that the central bank “needs to be very vigilant” about the impact of fluctuations in the yen’s exchange rate on inflation when guiding monetary policy.
Bloomberg said the Bank of Japan will likely discuss slowing its bond purchases at a two-day policy meeting next week, which could push up yields in the coming weeks and come before a rate hike in July. Analysts at TD Securities said on Tuesday they expect this.
Alex Lu, forex and macro strategist at TD Securities in Singapore, said investors were likely unwinding carry trades after the Indian rupee and Mexican peso fell on Monday following the recent election results.
In a carry trade, investors borrow a low-yielding currency, such as the yen or Swiss franc, to buy a higher-yielding currency, such as an emerging market currency.
“As a result, the Japanese yen and Swiss franc have recorded significant gains during today’s trading session,” Lu said.
The Mexican peso is still falling against the dollar, but not as much as it did on Tuesday, when it fell more than 4%. The dollar was last up 0.8% to 17.805.
The Indian rupee remained weak against the U.S. dollar, last trading 0.5 percent higher at 83.539, as the future of Indian Prime Minister Narendra Modi’s coalition remained uncertain after it lost its majority in parliament.
In the UK, the pound also hit its highest level since mid-March at $1.2818, but has since fallen 0.3% to $1.2777.
Against the Swiss franc, the dollar also fell to its lowest since March at 0.8971 francs. It was last down 0.5% to 0.8989 francs. Data showed that Swiss inflation remained steady at 1.4% year-on-year in May.
The currency market was also affected by a fall in crude oil prices as investors worried about rising supply in the second half of the year amid signs of weakening U.S. demand.
The Australian dollar weakened 0.7 percent against the US dollar to $0.6642, while the Norwegian krone weakened 1.4 percent against the greenback to 10.5778 kroner, in signs that commodity currencies were under pressure.
(Reporting by Harry Robertson in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Kevin Buckland in Tokyo; Editing by Michael Perry, Alex Richardson, Chizu Nomiyama and Mark Heinrich)
