Dollar Sheds Some Rally Gains As U.S. Yields Sag On Payroll Data

The dollar edged lower in Asia on Monday as U.S. Treasury yields sagged, after Friday’s U.S. jobs data fell short of expectations and prompted some investors to take profits on extremely long dollar positions.

The dollar index .DXY slipped about 0.3 percent to 87.368, following a 0.4 percent fall on Friday when it retreated from 88.190 – a high not seen since June 2010.

U.S. employers added 214,000 jobs to their payrolls last month, missing forecasts for 231,000. Still, details of the report were solid, with the unemployment rate dipping to a fresh six-year low of 5.8 percent even as more people entered the work force.

The disappointing headline figure prompted a rally in U.S. Treasury prices and knocked yields off one-month peaks hit shortly before the release of the jobs data. The yield on benchmark 10-year Treasury notes US10YT=RR stood at 2.304 percent in Asian trade, below its U.S. close of 2.312 percent on Friday.

The lower yields undermined the dollar. The euro added about 0.2 percent to $1.2485 EUR= from a two-year trough of $1.2358 touched on Friday, and the greenback slid about 0.4 percent on the day to 114.18 yen JPY=, well below Friday’s seven-year high of 115.60.

“The move that we’ve seen since the Bank of Japan meeting was fairly strong, even a bit excessive,” said Mitul Kotecha, head of FX strategy, Asia-Pacific for Barclays in Singapore, referring to the BOJ’s unexpected Oct. 31 announcement of further easing steps.

“So it’s not surprising that we’ve seen a little bit of a pullback, triggered by this drop in yields,” he said.

Recent data has shown that the U.S. economy is outperforming Europe and Japan and has highlighted the diverging policy outlooks between the Federal Reserve and the European Central Bank and the BOJ. This has supported a four-month long rally in the dollar, but Friday’s reaction suggested investors were starting to turn a bit cautious in the face of massive dollar-long positioning.

Speculators raised net long U.S. dollar positions in the week ended Nov. 4 to the highest in at least six years, data from the Commodity Futures Trading Commission showed on Friday.

The value of the dollar’s net long position increased to $44.38 billion from $42.39 billion the previous week, marking the largest such net position since 2008, when Reuters started calculating it.

Commodity currencies also got a bit of reprieve, with the Australian dollar adding about 0.4 percent to pop back above 86 U.S. cents to $0.8669 AUD=D4 from a four-year low around $0.8540 hit on Friday.

Also helping underpin commodity currencies, data from China on Saturday showed export growth did not slow as much as feared.

“Overall, the data painted a similar macro picture as in previous months: robust export growth led by the U.S. and ASEAN demand, and depressed imports driven by falling commodity prices and soft domestic demand,” said Jian Chang, analyst at Barclays.

That helped the Aussie stay buoyant even after data on Monday showed China’s annual consumer inflation remained near a five-year low as expected in October, reinforcing expectations that authorities in the world’s second-largest economy will roll out more measures to support growth.

Source : Reuters