NEW YORK – The dollar weakened after US labor data for February showed slower wage growth, suggesting an easing of inflation pressures may keep the Federal Reserve’s pace of interest rate hikes modest and thereby reduce the greenback’s appeal.
The US economy added jobs at a brisk clip in February, but slower wage growth and a rise in the unemployment rate prompted financial markets to dial back expectations for a 50-basis point rate hike when Fed policymakers meet in two weeks.
Congressional testimony earlier in the week by Fed Chairman Jerome Powell was seen as hawkish and strengthened the dollar as Treasuries pay more in yield than other government debt.
The dollar slid against all major currencies, but was essentially flat against the Canadian dollar. The dollar index, a basket of trading currencies, fell 0.618 percent.
Adding to the plunge in Treasury yields was the closing of SVB Financial Group, the largest bank failure since the financial crisis, as California regulators moved quickly to protect depositors at the startup-focused lender.
The yield on benchmark 10-year Treasury notes fell more than 22 basis points to under 3.70 percent in the biggest single-day drop in four months. Bond yields move opposite to their price.
“There is a significant, in my opinion anyway, safe-haven bid going on,” said Kevin Flanagan, head of fixed income strategy at WisdomTree. “There are concerns about potential banking stress.”
Average hourly earnings for all private workers rose 0.2 percent versus 0.3 percent in January, and lifted the year-on-year figure to 4.6 percent. Economists expected hourly earnings to rise 0.3 percent in February, which would have raised wages by 4.7 percent annually. — Reuters
