NEW YORK (Reuters) - The dollar on Wednesday dropped to a one-week low against the yen and declined for a second straight session versus the euro, amid worries about global growth following data released a day earlier showing a sharp decline in U.S. manufacturing activity.
The greenback tracked falls in U.S. equities and Treasury yields.
Wednesday’s U.S. payrolls report on the private sector showed a lower-than-expected figure for September, although some market participants were relieved the data was not as bad as many initially feared, especially in the wake of the poor U.S. manufacturing numbers.
Data from the U.S. payrolls processor ADP showed the U.S. private sector jobs added 135,000 jobs last month, lower than the 140,000 forecast, suggesting trade tensions, which have pressured manufacturing, could be spilling over to the labour market.
The dollar initially trimmed losses against the yen and euro after the U.S. jobs data but further weakened as the trading day went on.
“The market is overly sensitive to data misses,” said Alfonso Esparza, senior market analyst, at FX broker OANDA in Toronto.
“Employment has been one of the strongest pillars of the U.S. economic recovery and it has held out well against the backdrop of the U.S.-China trade war. But we might see jobs wobble a little bit given that we’re starting to see weakness in manufacturing in the United States much like in Europe, Japan, China.”
Esparza said there is a lot of concern about what Friday’s U.S. non-farm payrolls report will look like, though the numbers should still be solid despite the manufacturing misstep.
U.S. manufacturing contracted at the fastest pace in more than a decade in September, data showed on Tuesday, making the United States the latest country to suffer a manufacturing downturn amid the trade war between Washington and Beijing.
Many analysts say, however, the dollar’s higher yield and the relative strength of the U.S. economy should make this setback temporary.
In afternoon trading, the dollar fell 0.6% against the yen to 107.39 yen, reflecting investor demand for safer assets. The U.S. currency earlier fell to a one-week low of 107.06 yen.
The euro rose 0.3% against the dollar to $1.0959, above Tuesday’s two-year low of $1.0877.
The dollar index, which measures the greenback’s value against a basket of other currencies, was down 0.1% at 99.014 after reaching 99.667 on Tuesday, a 29-month peak hit just before the manufacturing data was released.
Elsewhere, the Australian dollar was flat at US$0.6700 AUD=D3, after trading mostly lower. The Aussie dollar earlier fell to a 10-year low after the Reserve Bank of Australia cut rates to a record low the day before.
The pound was also little changed against the dollar at $1.2305 as the greenback’s losses extended. Sterling’s outlook, however, remained uncertain amid doubts over whether Prime Minister Boris Johnson’s final Brexit offer to the European Union would be well-received by Brussels.
Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette Baum and Steve Orlofsky