The dollar declines with expectations of a US interest rate cut in December

The dollar fell today, after job data in the US private sector raised concerns about the strength of the labor market, while investors are preparing for an imminent end to the government shutdown in the United States, a move that is expected to unleash a torrent of postponed economic data.

Payroll management company ADB said that American companies shed more than 11,000 jobs per week until late October, an indication of weekly developments in employment trends and a weak labor market that policymakers at the Federal Reserve (the US central bank) are closely monitoring.

The dollar fell following the release of the data and had difficulty recovering its losses in early Asian trading on Wednesday, as traders increased bets on the Federal Reserve cutting interest rates in December.

The euro settled at $1.1586, while the pound sterling moved away from its lowest level in seven months, trading in the latest transactions at $1.3149.

As for the dollar index, which measures the performance of the US currency against a basket of currencies, it settled near its lowest level in more than a week at 99.46.

“I think the alternative data generally points to a weaker picture in the labor market… but what if we see a worsening deterioration in the US labor market, I think that remains an open question,” said Sim Moh Siong, currency analyst at the Bank of Singapore.

He added, “The broader set of data suggests that the labor market is calming, but gradually, and I think we should see some confirmation of that after official data returns, likely by next week, with the US government reopening.”

The CME Group’s FedWatch tool shows that traders now expect, by 68 percent, that the Federal Reserve will cut interest rates by 25 basis points next month.

The Republican-controlled House of Representatives is scheduled to vote Wednesday afternoon on a compromise that would restore funding to government agencies and end the shutdown that began on October 1.

This breakthrough led to a rise in high-risk currencies such as the Australian and New Zealand dollars, which rose 0.02 percent each at $0.6529 and $0.5656, respectively.

Meanwhile, the Japanese yen settled at 154.08 to the dollar after falling to a nine-month low of 154.495 in the previous session.