FOREX-Dollar weakens as September rate cut bets mount

(Recasts; adds analyst quote; updates prices)
By Kate Duguid
NEW YORK, Aug 2 (Reuters) - The dollar fell broadly on
Friday as news of slower U.S. employment growth in July and
heightened U.S.-China trade tensions fueled expectations that
the Federal Reserve would cut interest rates again in September.
Nonfarm payrolls increased by 164,000 jobs in July, fewer
than the month prior, and wages increased modestly, the Labor
Department said. The report came a day after U.S. President
Donald Trump announced an additional 10% tariff on $300 billion
worth of Chinese imports starting Sept. 1, leading financial
markets to almost fully price in a September rate cut. The dollar fell 0.76% against the Japanese yen JPY= to its
lowest since Jan. 3, last at 106.50. Versus the euro EUR= it
was 0.22% weaker at $1.1109. The Swiss franc CHF= , which like
the yen serves as a safe-haven investment in times of market
volatility, was 0.83% stronger to 0.9818 franc per dollar.
"On balance it is probably a slightly dollar-negative number
because I do think that the totality of the report increases the
case for a Fed rate cut in September. We're already at the point
where we're trading that," said Greg Anderson, global head of
foreign exchange strategy at BMO Capital Markets in New York.
The U.S. central bank on Wednesday cut its short-term
interest rate for the first time since 2008. Fed Chair Jerome
Powell described the widely anticipated 25-basis-point monetary
policy easing as a mid-cycle policy adjustment to protect U.S.
expansion from the global economic slowdown happening outside
its borders. Following the cut, the dollar rose in sympathy with U.S.
Treasury note prices, but that move had largely been retraced on
Friday.
The chance of a September rate cut was 98.1% on Friday
afternoon, according to CME Group's FedWatch tool, a large jump
from 56.2% a week prior. Not all market participants were
persuaded.
"We think that's way too high. Clearly what (Powell) wanted
to convey at the press conference was that there's no certainty
about what the next move is going to be," said Gershon
Distenfeld, co-head of fixed income at AllianceBernstein.
"The reality is that if the intention was to ease monetary
conditions, this did exactly the opposite. Equities are down,
the curve is flatter, the dollar higher - all monetary
tightening conditions here in the U.S. So they didn't really
accomplish much except getting markets nervous."