By Karen Brettell
NEW YORK (Reuters) – The dollar fell to a three-week low against the yen on Friday after data showed U.S. job growth slowed more than expected in April and annual wage gains cooled, raising expectations that the Federal Reserve will cut interest rates twice this year.
Employers added 175,000 jobs last month, below economists’ expectations for an increase of 243,000. Wages rose 3.9% in the 12 months to April, which is lower than expected for a 4.0% increase after a 4.1% increase in March.
The unemployment rate rose from 3.8% to 3.9% and remained below 4% for the 27th month in a row.
“From the Fed’s perspective, the numbers are weak across the board,” said Jason Pride, head of investment strategy and research at Glenmede in Philadelphia.
Fed funds futures traders were betting the Fed would cut rates twice this year, pricing in a easing of 47 basis points, up from 42 basis points before the data.
“The market right now is so hoping the Fed can cut rates this year and didn’t want any of the hot data to come in. Today’s report certainly gives them a cooler view of the labor landscape,” said Quincy Krosby, chief global strategist . at LPL Financial (NASDAQ:) in Charlotte.
Still, the report itself is unlikely to influence Fed policy unless the trend continues.
“An unemployment rate of 3.9% is not something disastrous. This points to an economy that is not in dramatic decline, but it certainly points to a looser labor market,” Pride said. “It gives the Fed some hope, but it doesn’t set the trend for them.”
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The Fed said Wednesday after its two-day meeting that persistent inflation meant it would take longer to cut rates.
Inflation should continue to fall even as the U.S. central bank maintains its benchmark interest rate at current levels, Fed Governor Michelle Bowman said on Friday, reiterating her willingness to raise the key rate if progress slows or reverses.
The jobs report showed “solid” growth that slowed to a point where Fed officials could feel more confident the economy is not overheating, Chicago Fed President Austan Goolsbee said Friday.
Other data on Friday showed the U.S. services sector contracted in March while prices companies paid for inputs jumped, a worrying sign for the inflation outlook.
The euro last fell 0.27% at 105.03, after reaching a level of 104.52, the lowest since April 10. The euro rose 0.39% to $1.0766.
The dollar weakened 0.48% to 152.9 Japanese yen, hitting a low of 151.86, its weakest since April 10.
The yen rose in light trading late Wednesday and Monday, which traders and analysts attributed to intervention by Japanese authorities.
Japanese Finance Minister Shunichi Suzuki said on Friday that authorities may need to ease excessive yen movements that are hurting households and businesses.
The yen is on track for its best weekly percentage gain against the dollar since November 2022, after Japanese authorities also intervened to support the currency in October 2022.
The yen hit a 34-year low of 160.245 on Monday as the currency suffers from a wide interest rate differential with the dollar.
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In cryptocurrencies, bitcoin gained 5.30% to $61,828.
