The dollar wobbled near two-year low against the euro on Wednesday after disappointing U.S. jobs data cemented expectations that the Federal Reserve will keep its stimulus in place at least until early next year.
Data showed U.S. employers added far fewer workers than expected in September, suggesting the U.S. economy may have lost some momentum even before a damaging 16-day partial shutdown of the federal government.
“It’s becoming difficult for the Federal Reserve to reduce its stimulus this year,” said Shinichiro Kadota, currency strategist at Barclays.
On Tuesday the euro rose to as high as $1.3792, its strongest level since mid-November 2011. It last stood at $1.3780.
The common currency, also benefiting from hopes of a recovery in the euro zone economy, hit a four-year high of 135.52 yen on Tuesday. It traded at 135.26 yen in early Asian trade.
U.S. nonfarm payrolls increased by 148,000 workers last month, below economists’ median forecast of 180,000. While the job count for August was raised, employment gains in July were revised lower to the weakest level since June 2012.
A majority of U.S. primary dealers polled by Reuters now believe the Federal Reserve will not start cutting its current $85 billion a month bond buying until March.
That view put pressure on the dollar index, which fell to its weakest in eight months at 79.182 on Tuesday and last stood at 79.259 .DXY, near this year’s low of 78.918 marked in February.
The dollar did not make much headway against the yen, even though rising expectations of continued Fed stimulus tends to boost risk appetite and hurt the safe-haven yen.
The dollar stood at 98.15 yen, stuck in a familiar trading range between 97 and 100 in the past few weeks.
“The latest market move confirms that the dollar/yen can rise only so much as long as there are expectations of a Fed stimulus,” Osamu Takashima, chief currency strategist at Citigroup Securities in Tokyo, said in a report.
The Australian dollar stood near a 4-1/2-month high of $0.9730 touched on Tuesday, having retraced a half of its April-to-August fall.
The currency traded at $0.9704, near important resistance from its 200-day moving average at 0.9749.
An immediate focus is Australian CPI data for the third quarter due at 1130 a.m., with economists expecting annual headline CPI inflation to ease to 1.8 percent from 2.4 percent in the second quarter.
A higher than forecast inflation reading could dampen expectations of a rate cut by the Australian central bank and further boost the Aussie dollar.