March 12, 2018 / 2:53 PM / 10 months ago

FOREX-Dollar sinks as benign wage inflation, tariff action weigh

    * Dollar on the defensive against most currencies
    * Euro outlook uncertain, still hurt by ECB meeting
    * Yen gains after suspected Japan cronyism scandal
    * Graphic: World FX rates in 2018

 (Recasts, updates price, adds table, changes byline, dateline;
previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 12 (Reuters) - The dollar fell against most
currencies on Monday, pressured by data showing persistently low
wages that will likely constrain the Federal Reserve from
raising interest rates more than three times this year.
    Friday's non-farm payrolls report showed U.S. job gains for
February were much higher than expected, but wage inflation, a
closely-watched indicator by the Fed, remained subdued.
    "Mixed messages on America's labor market last week largely
offset and, importantly, failed to move the dial in favor of
faster rate hikes from the Fed," said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington.
    "To excite the dollar and move the needle for the Fed to
raise rates at a quicker pace, wage growth would need to move
above 3 percent," he added.
    Average hourly earnings edged up four cents, or 0.1 percent,
to $26.75 in February, a slowdown from the 0.3 percent rise in
January. That lowered the year-on-year increase in average
hourly earnings to 2.6 percent from 2.8 percent in January.
    The dollar also struggled as a result of uncertainty about
U.S. trade protectionism, analysts said, after President Donald
Trump imposed tariffs on steel and aluminum imports, except
those from Mexico and Canada. 
    "We remain cautious on the outlook for the U.S. dollar and
reiterate that tariff action – even on a limited scale – has not
reflected positively on the dollar overall in the past," said
Shaun Osborne, chief currency strategist at Scotiabank in
    "Generally speaking, we think that protectionist regimes do
not necessarily support a strong domestic currency either."
    In mid-morning trading, the dollar fell 0.3 percent against
the yen to 106.53 yen, and was down 0.2 percent at 0.9496
franc versus the Swiss currency.
    The yen, which tends to perform well when markets are
anxious, gained as traders eyed a suspected cover-up of a
cronyism scandal involving Japanese Prime Minister Shinzo Abe
and his close ally, Finance Minister Taro Aso.     
    The euro, meanwhile, inched up against the dollar to $1.2315
, pushing the dollar index down 0.1 percent at 90.0122
    After a strong start to 2018, the euro remains below the
three-year peak hit in February of $1.2556. A
more-dovish-than-expected central bank meeting last week
continued to weigh on the single currency.
    The euro fell last week as the European Central Bank said
inflation expectations remained subdued and that monetary policy
would remain "reactive."
    "The euro is still suffering in the aftermath of the ECB
meeting," said Alvin Tan, a currencies analyst at Societe
Generale. "The cross currents are affecting the euro."
    Currency bid prices at 10:32AM (1432 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.2311        $1.2305     +0.05%         +2.63%      +1.2341     +1.2291
 Dollar/Yen       JPY=        106.5100       106.7700    -0.24%         -5.47%      +106.9700   +106.3700
 Euro/Yen         EURJPY=     131.11         131.41      -0.23%         -3.00%      +131.6900   +130.9800
 Dollar/Swiss     CHF=        0.9491         0.9510      -0.20%         -2.59%      +0.9514     +0.9486
 Sterling/Dollar  GBP=        1.3887         1.3850      +0.27%         +2.78%      +1.3905     +1.3842
 Dollar/Canadian  CAD=        1.2828         1.2810      +0.14%         +2.00%      +1.2838     +1.2804
 Australian/Doll  AUD=        0.7864         0.7849      +0.19%         +0.78%      +0.7879     +0.7847
 Euro/Swiss       EURCHF=     1.1683         1.1705      -0.19%         -0.05%      +1.1715     +1.1677
 Euro/Sterling    EURGBP=     0.8862         0.8886      -0.27%         -0.24%      +0.8896     +0.8850
 NZ               NZD=        0.7289         0.7280      +0.12%         +2.86%      +0.7323     +0.7289
 Dollar/Norway    NOK=        7.7583         7.7751      -0.22%         -5.47%      +7.7904     +7.7496
 Euro/Norway      EURNOK=     9.5502         9.5729      -0.24%         -3.03%      +9.5935     +9.5516
 Dollar/Sweden    SEK=        8.2506         8.2426      +0.13%         +0.60%      +8.2670     +8.2221
 Euro/Sweden      EURSEK=     10.1574        10.1443     +0.13%         +3.24%      +10.1662    +10.1366
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Tommy Wilkes in London
Editing by Susan Thomas)
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