Dollar slips with yields, oil still falling

By Wayne Cole

SYDNEY (Reuters) – The U.S. dollar took an early dip on Monday as Asian investors caught up with a benign payrolls report and the subsequent slide in Treasury yields, though turnover was light with Tokyo on holiday.

Share markets were opening lower following a soft finish on Wall Street though sentiment was supported by speculation the Federal Reserve would be patient in tightening policy given the weakness of wages apparent in the jobs numbers.

Wages fell by the most since the series began in 2006 even as payrolls increased by a brisk 252,000.

Treasury yields fell sharply on the news as the market pushed out the likely timing of the first rate hike <0#FF:>, which in turn undercut the dollar.

The greenback dipped as far as 118.22 yen <JPY=> first thing on Monday, reaching a low last seen on Jan. 6, before steadying at 118.30. The euro edged up to $ 1.1861 <EUR=> and away from last week’s nine-year trough of $ 1.1754.

The dollar index <.DXY> slipped to 91.854, off a nine-year peak of 92.528 scaled last week.

With Tokyo shut, there was little initial reaction to news Japan’s government planned a record budget for next fiscal year of more than $ 800 billion as Prime Minister Shinzo Abe seeks to shore up the economy.

Australia’s share market started the new week with a loss of 0.7 percent <.AXJO>, while MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was all but flat.

On Wall Street, the Dow <.DJI> ended Friday down 0.95 percent, while the S&P 500 <.SPX> fell 0.84 percent and the Nasdaq <.IXIC> 0.68 percent.

The U.S. corporate earnings season starts this week and expectations are low given sluggish global growth and the strength of the dollar.

Euro zone share markets had been pressured in part by reports the European Central Bank had still not decided on a plan for quantitative easing and might buy only 500 billion euros of government bonds.

Investors have been wagering that the purchases would be at least twice that and would be announced in full at the next policy meeting on Jan. 22. [TOP/CEN]

Italy’s central bank chief warned on Sunday the risk of deflation in the euro zone should not be underestimated. He said the best way to deal with the problem is to buy government bonds.

In commodity markets, oil prices remained under pressure having hit their lowest since April 2009.

Brent <LCOc1> was quoted down 56 cents at $ 49.55 a barrel, after touching a trough of $ 48.90 on Friday. U.S. crude <CLc1> slipped 63 cents to $ 47.73 a barrel.

(Editing by Shri Navaratnam)