Dollar Backtracks as Traders Expect Continued Low Interest Rates

 
   By James Ramage and Nicole Hong 
 

        The dollar pulled back against major currencies Friday after investors decided a strong U.S. jobs report wouldn't drive the Federal Reserve to raise interest rates sooner than expected.
        The greenback traded flat against the yen on the day, at JPY102.32. The yen had briefly crossed JPY103 following the number's release earlier in the session, its weakest level since April 8, before rebounding.
        The euro has lost 0.1% versus the dollar, trading at $1.3860. After the jobs number came in, the common currency dropped to as low as $1.3812 against the buck.
        The dollar received an initial boost after the Labor Department reported the U.S. gained jobs at the fastest pace in more than two years last month and the jobless rate fell.
        The Federal Reserve has said jobs growth is one of the factors it would consider before raising interest rates, which are currently near zero. Higher U.S. rates increase the allure of holding dollars as it boosts returns over those currencies of countries that keep interest rates unchanged or lower them.
        "Though it was a solid jobs report, as markets digested it, there was perhaps a reflection that it's not going to lead to an immediate change in the path of Fed policy for the near term," said Nick Bennenbroek, head of currency strategy at Wells Fargo Securities, LLC. "That contributed to the reversal seen in the dollar."
        The central bank has maintained that it would keep short-term interest rates at current levels well after it is due to conclude its bond-purchasing program at the end of 2014. Investors predict the Fed would start to raise rates midway through 2015 at the earliest.
        The dollar briefly strengthened against most emerging-market currencies on interest-rate hopes as well. But the emerging-market currencies quickly pared losses, with several currencies like the Brazilian real and Turkish lira even turning positive on the day against the dollar. Analysts say the report wasn't strong enough to alter the outlook for the Fed, which means investors can continue taking advantage of the higher yields in emerging markets without worrying about short-term volatility in U.S. interest rates.
        "The market is still not too concerned about any major shift in U.S. monetary policy," said Clyde Wardle, a senior emerging-market currency strategist at HSBC in New York. "Whatever kneejerk reaction we saw in emerging markets has completely unwound."
        Against the Mexican peso, the dollar was at 13.0021, down 0.3%. The dollar was at BRL2.2179 against the Brazilian real, down 0.7%. The dollar did rise against the Russian ruble, trading 0.6% higher at RUB35.852.
        Write to James Ramage at james.ramage@wsj.com and to Nicole Hong at nicole.hong@wsj.com
        (END) Dow Jones Newswires

        May 02, 2014 12:29 ET (16:29 GMT)