*
US private payrolls post smallest gain in over two years
in May
*
US service sector unexpectedly contracts in May; inflation
heats
up
*
Trump says Fed's Powell must lower interest rate
*
Trump to speak this week with China's Xi amid clash over
tariff
truce
(Updates to US afternoon)
By Saqib Iqbal Ahmed
NEW YORK, June 4 (Reuters) - The dollar fell across the
board on Wednesday after weaker-than-expected U.S. private
payrolls numbers highlighted continued easing in the labor
market and data showed the U.S. services sector contracted for
the first time in about a year in May.
U.S. private payrolls rose by only 37,000 jobs in May, far
less than expected, after a downwardly revised 60,000 rise in
April, the ADP National Employment Report showed on Wednesday.
Economists polled by Reuters had forecast private employment
increasing 110,000 following a previously reported gain of
62,000 in April.
U.S. President Donald Trump reiterated his calls for Federal
Reserve Chair Jerome Powell to lower interest rates following
the data.
"It's a major gap between expectation and actual," Juan
Perez, director of trading at Monex USA in Washington.
"This idea that labor has not been hurt and that the
post-pandemic recovery was good enough that people are enjoying
good opportunities ... that narrative is changing and that's
absolutely very negative for the U.S. dollar," he said.
Separately, data showed the U.S. services sector contracted
for the first time in nearly a year in May while businesses paid
higher prices for inputs, a reminder that the economy remained
in danger of a period of very slow growth and high inflation.
"The Fed will take notice of slower job growth, but this
won't be enough to convince them to cut interest rates near
term," Bill Adams, chief economist for Comerica Bank, said in a
note.
The dollar fell 0.7% to 142.89 Japanese yen. The euro rose
0.4% to $1.1414, ahead of the European Central Bank's decision
on interest rates expected on Thursday.
Investors are awaiting Friday's monthly payrolls figures
to gauge the state of the labor market, and remain focused on
trade negotiations.
The Trump administration has given a Wednesday deadline for
countries to submit their best offers on trade, the same day
duties on imported steel and aluminium doubled.
Trump is also tipped by the White House to have a call this
week with Chinese President Xi Jinping, after the two sides
accused each other of violating the terms of an agreement last
month to roll back some tariffs.
Trump posted on his social media platform on Wednesday that
Xi was "tough" and "hard to make a deal with."
The dollar index, which measures the greenback
against six major currencies, was 0.3% lower on the day at
98.838, not far from its late-April low of 97.923.
The Hong Kong dollar was at 7.847 per U.S. dollar,
the closest it has been to 7.85 - the weak end of its trading
band against the U.S. dollar - since August 2023, according to
LSEG data.
Sterling was 0.2% higher at $1.35515. The UK and
its metal exports are exempt from the increased U.S. duties,
given Britain has a trade deal in place.
Traders were also monitoring developments in Japanese
markets after sources told Reuters the Bank of Japan is
considering slowing down the tapering in its bond purchases from
next fiscal year onward.
The Canadian dollar was about 0.4% higher versus
its U.S. peer after the Bank of Canada on Wednesday held its key
benchmark rate at 2.75%, citing the need to probe the effects of
U.S. trade policy.
Canada is prepared to strike back if talks with Washington
to remove Trump's tariffs did not succeed, Prime Minister Mark
Carney said on Wednesday.
Bitcoin, the world's largest cryptocurrency by market
capitalization, was 0.7% lower at $105,064.