By Stefano Rebaudo and Gregor Stuart Hunter Dec 16 (Reuters) - The U.S. dollar hovered around multi-week lows against the euro and yen on Tuesday as investors awaited U.S. economic data later in the
US Dollar Declines After Strong Jobs Data, Fed Rate Outlook
By Chibuike Oguh
NEW YORK, Dec 16 (Reuters) - The U.S. dollar eased against major peers on Tuesday after the release of delayed economic data showing stronger-than-expected jobs growth, signalling that the Federal Reserve might be cautious in continuing to cut interest rates in the near term.
The U.S. economy added 64,000 jobs in November, surpassing an estimate from economists polled by Reuters. That came after the economy shed 105,000 jobs in October, according to Labor Department data.
The employment report was delayed because of the 43-day U.S. federal government shutdown.
The greenback eased against its peers following the data. It was last down 0.18% to 0.79475 against the Swiss franc.
"The data was mixed, there were some good signs in hiring and a little better than expected, but not massively so," said John Velis, Americas FX and macro strategist at BNY.
"I think the downside is that the unemployment number increased from 4.4% to 4.6%, which could get the Fed's eyebrows raised in January," Velis said.
Fed funds futures are pricing an implied 75.6% probability of a hold in rates at the U.S. central bank's next meeting on January 28, up from nearly 70% a week ago, according to the CME Group's FedWatch tool.
"The fact that most of the jobs that were created were in non-cyclical sectors such as healthcare suggests there's not a lot of cyclical activity picking up. The headline numbers were goodish but the guts of the data were not so great. So the market called it a punt, or kind of even," Velis added.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.11% to 98.15. It is on track for the second straight session of losses.
"This report hasn’t really changed the story, particularly given the BLS (Bureau of Labor Statistics) health warning that the latest data points are (even) less reliable than usual," TS Lombard analyst Dario Perkins wrote in an investor note.
"The central bank still believes monetary policy is v slightly restrictive, and that gives it an option to cut rates again in the coming months – possibly even in January. But the situation doesn’t seem particularly urgent," Perkins added.
CENTRAL BANK DECISIONS IN FOCUS
Central bank decisions are in focus this week. The European Central Bank is widely expected to hold interest rates on Thursday.
Economic data out of the euro zone was mixed but supported the ECB's higher-for-longer policy rate stance and bolstered the euro. Data showed German investor morale rising more than expected in December and euro zone business activity growth slowing at the end of 2025.
The euro was up last 0.05% to $1.1788 against the greenback in choppy trading, touching its highest level since September and on track for the fifth consecutive session of gains.
The Bank of England, on the other hand, looks set for a knife-edge vote on interest rates this week with Governor Andrew Bailey expected to change his view and tip the balance for a cut.
Sterling strengthened 0.39% to $1.34305, hitting its highest level in two months ahead of the BoE's decision on Thursday.
A rate hike from the Bank of Japan is largely baked in, although any signal that policymakers could tighten again before spring wage talks would mark a hawkish shift.
Big Japanese manufacturers' business sentiment reached a four-year high in the three months to December, supporting expectations for additional tightening. But analysts said the BoJ's policy update might fail to support the yen as fiscal concerns weigh.
The dollar dropped 0.36% to 154.65 against the yen ahead of the BoJ's decision on Friday.
Sweden's Riksbank and Norway's Norges Bank are expected to leave interest rates unchanged after their policy meetings this week.
The Swedish crown strengthened 0.09% versus the dollar to 9.286. Against the Norwegian krone,, the dollar strengthened 0.39% to 10.174.
In cryptocurrencies, bitcoin gained 1.62% to $87,629.19, on track to snap four straight sessions of losses. Ether rose 0.05% to $2,947.45.
(Reporting by Chibuike Oguh in New York and Stefano Rebaudo and Gregor Stuart Hunter; Editing by Mark Potter, Susan Fenton and Chizu Nomiyama and Mark Heinrich)
