Dollar steady after key jobs data comes in below estimates

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The US dollar stood near a one-week high against a basket of currencies on Tuesday, after fresh employment data showed that US job openings dropped in October to the lowest level since early 2021.

Job openings, a measure of labour demand, fell 617 000 to 8.733 million on the last day of October, the Labour Department said in its monthly Job Openings and Labour Turnover Survey, or JOLTS report, on Tuesday, coming in below estimates.

The slowing labour market and subsiding inflation have raised optimism that the US Federal Reserve is probably done raising interest rates this cycle, with financial markets even anticipating a rate cut in mid-2024.

“The Fed is trying to convince the markets that it could still raise rates,” said Joseph Trevisani, senior analyst at FXStreet.com.

“I think the markets think everything’s done, but the fact that the Fed is willing to go on about this is giving everybody pause.”

The dollar index was last up 0.12% at 103.73, around one-week highs.

Analysts said the dollar’s nudge up was in part due to a reversal of the heavy selloff in recent weeks that stripped 3% off the dollar index in November alone, its steepest monthly decline in a year.

Elsewhere, the yuan held steady in the face of a downgrade to the outlook for China’s credit rating from Moody’s, as major state-owned banks stepped in to stem any slide by selling dollars.

Bitcoin held close to its highest since April last year, above $42,000.

CUTS PRICED IN

Traders have priced in at least 125 basis points worth of rate cuts from the Federal Reserve next year, with a good chance of 50 bps by June, according to CME’s Fed Watch tool.

“The market’s main focus now is still very much on what central banks are going to do next year in terms of policy. We’ve had this very dramatic dovish repricing of rate expectations for both the Fed and the (European Central Bank) over the past week, so that’s certainly having an impact on FX markets,” MUFG currency strategist Lee Hardman said.

Investors believe the ECB could deliver its first rate cut by next March.

Inflation across the euro zone has fallen more quickly than most anticipated, as evidenced by last Thursday’s consumer price data.

The euro was last down 0.18% to $1.0817.

The yuan held steady after Moody’s decision to cut China’s credit outlook to “negative” on Tuesday, thanks in part to state-owned banks that were seen swapping yuan for US dollars in the onshore swap market and selling those dollars in the spot market, two sources with knowledge of the matter said.

Sterling was little changed at $1.262, down 0.13%, while the yen was steady, leaving the dollar at 146.91.

The Australian dollar fell 0.82% to $0.65645, below Monday’s four-month high, after the Reserve Bank of Australia (RBA) kept rates at a 12-year high of 4.35% on Tuesday.

In cryptocurrencies, Bitcoin was up 0.55% at $42,214, narrowly below Monday’s peak of $42,404, its highest since April 2022.

The world’s largest cryptocurrency has gained 150% this year, fuelled in part by optimism that a US regulator will soon approve exchange-traded spot bitcoin funds (ETFs).