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By mid-afternoon in New York, the US dollar had fallen 0.87% against the yen and nearly 1% against its Canadian counterpart. Cable rose 0.23% and the dollar index, a measure of the US dollar’s strength against a basket of six leading currencies, fell 0.53%.
The US Labor Department reported that 169,000 workers were added to non-farm payrolls in August, below the 180,000 that a Reuters poll of economists had forecast. Perhaps more significantly, there were substantial amednments downward to both June and July’s payroll figures. In total the revisions were 74,000, meaning previous employment reports were nowhere near as strong as had been originally thought.
The Fed has said that its decision on when it will begin dialling back on its monthly asset purchases will be dependent on whether the economy continues to progress in line with its forecasts. The minutes from the most recent FOMC meeting shows that some participants were already unsure that the economy was strong enough to handle tapering, and that was based on reports that over-stated the strength of the labour market.
Today’s employment data therefore seriously diminishes the chances of a reduction of any substance being introduced at the FOMC meeting later this month and that is pressuring the dollar.