* August payrolls increase below market expectations
* The data does not rule out nor enhance Fed rate hike hopes
By Hideyuki Sano
TOKYO, Sept 5 The U.S. dollar held firm in early
Asian trade on Monday after disappointing U.S. jobs growth
figures for August did little to change investors' perception
that the Federal Reserve is likely to raise interest rates in
Nonfarm payrolls rose by 151,000 jobs last month, the U.S.
Labor Department reported on Friday, below the 180,000 jobs that
economists had expected.
Average hourly wage earnings, a key gauge of inflationary
pressure, rose 0.1 percent, also fell short of market
expectations of 0.2 percent incraese.
Yet, with the average payroll increase over the last three
months handily topping 200,000, investors concluded that the
data would not be a serious blow to the Fed's plan to raise
U.S. Fed Funds futures price thus quickly gave up gains to
stand almost unchanged from before the data, pricing in just
over a 20 percent chance of a hike this month and more than a 60
percent chance by the end of year.
The dollar's index against a basket of six major currencies
managed to stay afloat, quickly bouncing back from
one-week low of 95.189 touched just after the payroll data.
"The market's reaction is perfectly understandable. While
the headline figure was weak, the data did not completely rule
out the possibility of a rate hike in September," said Masashi
Murata, senior currency strategist at Brown Brothers Harriman.
Against the yen the dollar quickly jumped back to
103.74 yen after having fallen to 102.80 yen following the
underwhelming U.S. payrolls data.
The euro hovered at $1.1155, not far from Wednesday's
three-week low of $1.1123.
There was limited reaction so far to the defeat of German
Chancellor Angela Merkel's Christian Democrats in a local
election on Sunday.
CDU were beaten into third place after not only Social
Democrats but also the anti-immigrant and anti-Islam Alternative
for Germany (AfD) party in an election in her home district of
The defeat, coupled with another drubbing that looms in two
weeks in Berlin, is casting an ominous shadow over the
Chancellor's hopes of winning - or even running - for a fourth
term in 2017.
"In the long run, this could become a really big story,
towards the German general election next year. If there are
fears that countries like Germany and France want to exit the
euro, talk of euro zone break-up may be rehashed for instance,"
Junya Tanase, chief currency strategist at JPMorgan Chase Bank.
The British pound held relatively firm at $1.3293,
having hit a one-month high of $1.3352 on Friday after a survey
showed a downturn in Britain's construction sector was easing.
Coming after surprisingly resilient reading in UK
manufacturing survey, the data helped to boost expectations that
the economy is holding up well after the shock Brexit vote in
A two-day summit of leaders from G20 nations that began on
Sunday has so far produced little in the way of market-moving
headlines while U.S. president Barack Obama described his
meeting with Chinese President Xi Jinping as "extremely
A joint "fact sheet", issued a day after the bilateral
talks, said China and the United States committed anew to
refrain from competitive currency devaluations, and that China
said it would continue an orderly transition to a
market-oriented exchange rate for the yuan.
(Editing by Kim Coghill)