The dollar weakened against the euro and yen Tuesday after productivity declined for the third straight quarter, giving the Federal Reserve yet another reason to leave interest rates on hold for longer.
The ICE U.S. Dollar Index , a measure of the buck’s value against a basket of six rival currencies, was down 0.2% at 96.2530. The euro bought $1.1115, compared with $1.1088 late Monday.
The U.S. dollar traded at ¥102.04, after rising to a high of ¥102.53 earlier in the session. By comparison, it traded at ¥102.32 late Monday in New York.
Productivity in the second quarter unexpectedly fell 0.5%. Economists surveyed by MarketWatch had forecast a 0.3% gain for the quarter.
The buck has drawn buyers in recent sessions thanks to investors refocusing on the solid U.S. July jobs report, released last week, that has renewed hopes for a Federal Reserve interest-rate increase in 2016. In theory, higher rates would cause the dollar to strengthen by increasing the return on dollar-denominated investments.
And while the productivity number certainly didn’t bolster the Fed’s case for raising rates in the coming months, the intense market reaction was more likely due to the absence of other important economic data on the calendar, said John Doyle, director of markets at Tempus Inc.
“It’s a number [the Fed] will take into consideration. But if this number was released on Friday with the retail sales data, we probably wouldn’t even mention it,” Doyle said. “It’s just the only thing we can trade on at the moment.”