FOREX-Weak data, rate cut bets knock dollar to six-month low against yen

(Recasts; adds analyst quote; updates rates; changes dateline,
previous LONDON)
By Kate Duguid
NEW YORK, June 5 (Reuters) - The U.S. dollar fell to a
six-month low against the Japanese yen on Wednesday after weak
private jobs data increased expectations of Federal Reserve
interest-rate cuts in 2019.
U.S. private employers added 27,000 jobs in May, well below
forecasts and the smallest monthly gain in more than nine years,
a report by a payrolls processor showed. The report knocked the dollar to its weakest against the
safe-haven yen JPY= since Jan. 10, last down 0.18% at 107.95
yen, building on a multi-day slide driven by growing
expectations of interest rate cuts. The dollar index .DXY fell
to an eight-week low, its fourth straight daily decline, last at
97.00.
Fed Chairman Jerome Powell dropped his standard reference to
the bank being "patient" in approaching a rate decision on
Tuesday, saying instead it would respond as "as appropriate" to
trade pressure. Expectations of an interest rate cut as soon as
July rose to 55.4% from 26.5% a week prior, according to CME
Group's FedWatch tool.
"Not only are we pricing in rate cuts aggressively, we're
pricing them in soon," said Marvin Loh, senior global markets
strategist at State Street Global Markets.
Those expectations may be overblown.
"I don't think the Fed wants to cut," said Loh. "The data
remains, not great compared to last year, but above trend."
The U.S. Labor Department delivers its non-farm payrolls
report on Friday, which includes both public and private-sector
employment. Economists polled by Reuters expect that report to
show job growth slowed in May.
"We'll be looking for some sort of confirmation that the
three month average is still in place. Last month was such an
outlier in terms of gains that you would expect it to slow down
a bit," said Loh.
The European Central Bank meets on Thursday, with investors
looking to see how concerned policymakers are about signs of a
downturn in growth. Speculation that the ECB could possibly
announce looser terms for a new cheap lending scheme sent German
10-year government bond yields DE10YT=RR to a record low of
minus 0.230%. The euro EUR= was up 0.07% at $1.126.
Recession fears are sweeping across the world and central
banks have cut rates in recent weeks.
Australia's central bank on Tuesday slashed benchmark cash
rates to a record low of 1.25%. Last month, New
Zealand's central bank cut its benchmark interest rate for the
first time in two-and-a-half years.