The dollar was on the defensive on Monday, after Friday’s firm US jobs report failed to shift the broadly held view that the Federal Reserve will remain cautious on interest rate hikes this year.

The dollar slipped about 0.2 per cent to 111.45 yen, after earlier skidding to as low as 111.32, its nadir since March 21.

“I think the market is too pessimistic today, against the dollar,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

“I don't see any reason that many people would want to buy the yen against the dollar,” he said, in light of the mostly positive US employment report as well as the likelihood of more monetary stimulus from Japan.

Japanese companies’ long-term inflation expectations weakened in March from three months ago, a Bank of Japan survey showed on Monday, a sign that the central bank’s January decision to adopt negative interest rates has so far failed to convince firms price rises will accelerate over time.

The euro edged up 0.1 percent to $1.1389, not far from a 5-1/2-month high of $1.1438 struck on Friday.

Non-farm payrolls data

According to Friday’s data, US non-farm payrolls rose 215,000 last month, slightly above expectations, and average hourly earnings rose after slipping in February. But the unemployment rate edged up to 5.0 per cent from an eight-year low of 4.9 per cent.

“The jobs data underscored the ongoing steady recovery by the US economy,” said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.

“But the Fed did not reduce its rate hike projections in March due to U.S. concerns but rather worries about overseas economies, so a strong jobs report did not do much to support tightening expectations.”

Manufacturing PMI

Markit’s US manufacturing Purchasing Managers’ Index (PMI) for March also improved slightly to 51.5, up from 51.3 in February, in brighter contrast with a weaker reading for Europe.

The Fed stood pat on monetary policy last month and reduced its rate hike expectations for the year to two from four.

Yellen’s comments

In comments that hit the dollar, Fed Chair Janet Yellen had said last week the US central bank should proceed only cautiously as it looks to raise interest rates, pushing back against a handful of colleagues who suggested another move may be just around the corner.

“Yellen has pretty much decided the dollar’s near-term direction, and with US jobs data out of the way, each currency will likely move on domestic factors versus the dollar,” Kadota at Barclays said.

Speculators slashed their bullish bets on the dollar for a fourth straight week, with net long positions falling to their lowest in nearly two years, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.

UK manufacturing survey

Sterling failed to capitalise on the dollar’s broad weakness, weighed down by a weak UK manufacturing survey.

The pound edged down slightly to $1.4220 after sliding 0.9 per cent on Friday. The currency has pulled back from a seven-year low of $1.3836 struck late in February on worries about Britain leaving the European Union but has remained shaky.

Against the euro, sterling was slightly higher with the European unit buying 80.02 pence. It rose as high as 80.20 pence on Friday, its highest since November 2014.

Mixed domestic data weighed on the Australian dollar, which slumped 0.5 per cent to $0.7628, moving away from an eight-month high of $0.7723 scaled last week when a bounce in commodity prices and broad losses by the dollar boosted the Aussie.

Muted retail sales, subdued inflation and a survey suggesting that labour demand may have peaked all pressured the Aussie.

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