Dollar up after weaker-than-expected jobs data, fueling rate bets

The U.S. dollar was higher against a basket of currencies on Tuesday, paring losses from a recent selloff in spite of data showing that U.S. job openings dropped in October to the lowest level since early 2021.

Job openings, a measure of labor demand, fell 617,000 to 8.733 million on the last day of October, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday, coming in below estimates.

The slowing labor market and subsiding inflation have raised optimism that the U.S. Federal Reserve is probably done raising interest rates this cycle, with financial markets even anticipating a rate cut in mid-2024.

“It just reinforces the narrative that we’ve been on, which is, Fed hiking is probably done. We’re shifting more into, when are they going to be easing? I think expectations are still all over the place in terms of that question,” said Brad Bechtel, global head of FX at Jefferies in New York.

The dollar index was last up 0.41 percent at 104.03, its highest in a week. Analysts said the dollar’s nudge up was in part due to a reversal of the heavy selloff in recent weeks that stripped 3 percent off the dollar index in November alone, its steepest monthly decline in a year.

Elsewhere, the yuan held steady in the face of a downgrade to the outlook for China’s credit rating from Moody’s, as major state-owned banks stepped in to stem any slide by selling dollars.

Bitcoin hit a fresh yearly high on Tuesday, above $43,000 – its highest since April 2022.

Cuts priced in

Traders have priced in at least 125 basis points worth of rate cuts from the Federal Reserve next year, with a good chance of 50 bps by June, according to CME’s FedWatch tool.

“The Fed is trying to convince the markets that it could still raise rates,” said Joseph Trevisani, senior analyst at FXStreet.com. “I think the markets think everything’s done, but the fact that the Fed is willing to go on about this is giving everybody pause.”

Investors believe the ECB could deliver its first rate cut by next March. Inflation across the euro zone has fallen more quickly than most anticipated, as evidenced by last Thursday’s consumer price data.

The euro was last down 0.5 percent to $1.0782.

The yuan held steady after Moody’s decision to cut China’s credit outlook to “negative” on Tuesday, thanks in part to state-owned banks that were seen swapping yuan for U.S. dollars in the onshore swap market and selling those dollars in the spot market, two sources with knowledge of the matter said.

Sterling was $1.258, down 0.4 percent, while the yen was steady, leaving the dollar at 147.26.

The Australian dollar fell 1.03 percent to $0.6545, well below Monday’s four-month high, after the Reserve Bank of Australia (RBA) kept rates at a 12-year high of 4.35% on Tuesday.

In cryptocurrencies, bitcoin was up 4.31 percent at $43,794, its highest since April 2022.

The world’s largest cryptocurrency has gained 150 percent this year, fueled in part by optimism that a U.S. regulator will soon approve exchange-traded spot bitcoin funds (ETFs).