NEW YORK, May 5: The dollar eased on Monday, failing to build on gains made last week on US jobs data that was not as weak as expected, as investors debated the strength of the US economy and the outlook for interest rates.

While the dollar rose on Friday, further assessment of the data left investors wary of calling a sustained dollar recovery, with more economic and corporate fallout expected from the ongoing credit crunch that started in August last year.

The dollar did pare losses after news the US service sector unexpectedly grew in April, easing concerns about the health of the US economy but that positive momentum proved fleeting.

Continued problems in the US economy would dent expectations for the US Federal Reserve to pause in its aggressive rate cutting cycle after last week’s 25 basis point easing to 2 per cent in the benchmark rate.

“We continue to believe that there is ongoing downside risk to the US economy,” said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto in a note to clients.

“The housing market has yet to bottom, consumer confidence is at multi-decade lows, employment growth has evaporated and high commodity prices are only exacerbating an already weak economic backdrop.”

The dollar was down 0.3 per cent on the day against a basket of six major currencies at 73.238, while the euro was up 0.4 per cent at $1.5492.—Reuters