By James Ramage
The dollar fell against the euro and the yen on Wednesday, as
disappointing U.S. data for manufacturing and employment suggested
a slowing economy in the first quarter.
The euro rose to $1.0773 from $1.0752 ahead of the reports,
increasing 0.4% for the New York session. The dollar fell to
Y119.60 from Y120.22 beforehand, now 0.5% lower for the day.
The dollar slide started after the employment report for March
assembled by payroll processor Automatic Data Processing Inc. and
forecasting firm Moody's Analytics showed the U.S. economy added
just 189,000 jobs last month, instead of the 225,000 that
economists had expected.
In addition, a survey by the Institute for Supply Management
showed U.S. manufacturing slowed for a fifth straight month. ISM's
manufacturing purchasing managers index declined to 51.5 in March
from 52.9 a month earlier; Economists had predicted a reading of
52.5.
The data dented the narrative of a relentlessly improving U.S.
labor market, ahead of Friday's nonfarm payrolls report for March.
Furthermore, the numbers add to recent shaky U.S. economic data,
which has contributed to investor worries about the Federal Reserve
delaying an expected increase in interest rates to September from
midyear.
"Investors are attaching more caution to the dollar in the short
run, given the hazy outlook for Fed policy," said Joe Manimbo,
senior market analyst at Western Union. "If you consider the
numbers we've seen in the first quarter, they're consistent with a
downshift in the economy, which could give the Fed pause in
tightening policy. That's negative for the dollar. Much is on the
line Friday for nonfarm payrolls and the dollar."
Economists expect the U.S. to have created 248,000 jobs in
March. The Fed closely monitors the jobs report and inflation
numbers in assessing the U.S. economy's health and in determining
when to raise interest rates for the first time in almost nine
years.
"It's the first report of the quarter and a key component of the
Fed's view of the economy," said Brad Bechtel, managing director at
Faros Trading LLC. "A jobs number that arrives in line will give
investors more of a sense of certainty for a June Fed rate
increase."
Write to James Ramage at
james.ramage@wsj.com<mailto:james.ramage@wsj.com>