Dollar rallies from worst loss in 4 months

Bloomberg

A gauge of the dollar partially rebounded after incurring its biggest loss since February on weaker-than-forecast payrolls data that doused speculation the Federal Reserve will raise interest rates in the coming months.
The U.S. currency remained near a three-week low against major peers touched Friday, when a Labor Department report showed employers in May added the least number of workers in almost six years. The Bloomberg Dollar Spot Index fell 1.6 percent in the five days ended June 3, halting a four-week rally that helped boost bullish bets on the greenback the highest since March.
“It’s not just about the odds of a hike next week being blown out of the water, it also looks like it’s increasingly become quite a challenge for the Fed to decide whether they can even hike in the third quarter or not,” said Vishnu Varathan, an economist at Mizuho Bank Ltd. in Singapore.
“There is a pervasive weakness that’s beginning to take hold, so the Fed would want to wait for a few months. ”
The greenback rose 0.3 percent to $1.1338 per euro, after tumbling 1.9 percent in New York. It rallied 0.4 percent to 106.96 yen, ending a four-day slide.

Cold Water
The U.S. currency rose 3.7 percent last month, paring its losses this year, after policy makers including Chair Janet Yellen said higher rates in the coming months look appropriate. The employment report throws cold water on prospects for greenback strength based on the expectation that the Fed would tighten policy while central banks in Europe and Asia add to stimulus.
Nonfarm payrolls climbed 38,000 in May, the smallest number in almost six years, and less than the most pessimistic forecast in a Bloomberg survey. The jobless rate dropped to 4.7 percent, the lowest since November 2007, as Americans left the labor force.
Hedge funds and other large speculators increased bullish bets on the dollar.