The dollar fell to its lowest in nearly two years against the euro on Tuesday after data showed the U.S. economy added just 148,000 jobs last month, cementing expectations that the Federal Reserve is likely to keep its stimulus plan for the rest of the year.
Economists were expecting jobs gains of 180,000 and the report covered the period before the government shutdown earlier this month. With the two-week shutdown already expected to have damaged the U.S. economy, the conviction that the Fed will not reduce its asset buying anytime soon became even more entrenched.
“Is the Fed getting tired of being right? Today’s underperforming jobs number fully justifies September’s cautious FOMC,” said Joseph Trevisani, chief market strategist at WorldWideMarkets in Woodcliff Lake, New Jersey.
“Full-bore quantitative easing will probably be with us through the first quarter and speculation for an increase (in QE) may be no further than another weak payroll.”
The unemployment rate did dip to 7.2 percent last month, the lowest level since November 2008, but that has become irrelevant in the wake of the U.S. government’s closure. Economists estimate the 16-day government shutdown shaved as much as 0.6 percentage point off annualized fourth-quarter gross domestic product, through reduced government output and damage to both consumer and business confidence.
In early New York trading, the euro hit a high of $1.3748 against the dollar, its strongest level since November 14, 2011. It was last at $1.3726, up 0.3 percent.
Against the yen, the dollar fell as low as 97.86. It last traded at 98.16 yen, flat on the day.