FOREX-Dollar drops to two-week low after US jobs surprise

Band Gertrude Chavez-Dreyfuss

NEW YORK, February 4 (Reuters) – The US dollar advanced from two-week lows on Friday after data showed the world’s largest economy added far more jobs than expected, raising the odds of a higher Federal Reserve interest rate ito augment at the political meeting in March.

The dollar index, an indicator of its value against the six major currencies, rose 0.1% at 95.446=USDafter falling to a two-week low of 95.136 earlier amid a resurgent euro.

But the dollar was still down 10.8% over the week, at the pace of its largest weekly percentage decline since November 2020.

Data showed nonfarm payrolls in the United States increased by 467,000 jobs last month. December data has been revised up to show 510,000 jobs created instead of the 199,000 previously reported.

Economists polled by Reuters had forecast 150,000 more jobs in January. Estimates ranged from a decrease of 400,000 to a gain of 385,000 jobs.

Market participants were expecting a weaker-than-expected reading given the decline in the ADP US Private Employment Report released earlier this week. This report showed a decline due to the impact of the Omicron coronavirus variant.

The average hourly wage, a measure of wage inflation and a metricalso rose 0.7% last month and 5.7% year-on-year.

“It’s the 0.7% month-over-month pay rise that is the most hawkish,” wrote Daragh Maher, head of FX strategy at HSBC. “This helps to counter bearish dollar real income compression fears and the stagflation theme, and will likely energize FOMC (Federal Open Market Committee) hawks.

The dollar also followed the surge in US Treasury yields.

US two years and five-year returns, which both reflect interest rate expectations, rose to 1.2970% US2YT=RRhighest since late February 2020, and 1.79% US5YT=RRits best level since July 2019, respectively.

In the afternoon session, US rate futures involved more than five rate hikes this year, or about 134.4 basis points in the policy tightening. The probability of a 50 basis point hike next month has risen to nearly 40%, from just 18% before data release. FEDWATCH

The euro was still up on the day, up 0.1% at $1.1455 EUR=EBS. It is up 1.7% on the week, on track for its best weekly performance since the end of March 2020, benefiting from a warmongering turn of the European Central Bank (ECB) on Thursday.

The Euro stalled around the $1.1480 resistance level on the back of the Dollar’s gains following the US jobs report.

HSBC’s Maher said the euro/dollar pair should regain its bullish momentum as the market seems more obsessed with ECB policy, which surprised markets, than the Fed.

The pound was also among the big currency moves this week, after the Bank of England raised rates to 0.5% on Thursday – marking the central bank’s first consecutive increases since 2004.

The pound but fell 0.5% to $1.3536 GBP=D3. On the week, it was up 1% this week.

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Currency rates at 3:38 p.m. (8:38 p.m. GMT)

The description

RIC

Last

Closing of the previous session

Percentage change

Percentage change since the beginning of the year

High bid

Low bid

dollar index

=USD

95.4040

95.3620

+0.06%

-0.271%

+95.7040

+95.1360

euro dollar

EUR=EBS

$1.1457

$1.1439

+0.17%

+0.79%

+$1.1483

+$1.1411

dollar/yen

JPY=EBS

115.1900

114.9950

+0.18%

+0.07%

+115.4200

+114.7700

Euro/Yen

EURJPY=

131.96

131.53

+0.33%

+1.26%

+132.0900

+131.4600

Dollar/Swiss

CHF=EBS

0.9249

0.9200

+0.54%

+1.40%

+0.9258

+0.9195

British pound/dollar

GBP=D3

$1.3534

$1.3599

-0.47%

+0.08%

+$1.3614

+$1.3505

Canadian dollar

CAD=D3

1.2746

1.2677

+0.55%

+0.81%

+1.2788

+1.2663

Australian/Dollar

AUD=D3

$0.7080

$0.7140

-0.83%

-2.59%

+$0.7151

+$0.7052

Euro/Switzerland

EURCHF=

1.0597

1.0522

+0.71%

+2.20%

+1.0602

+1.0522

Euro/pound sterling

EURGBP=

0.8465

0.8412

+0.63%

+0.77%

+0.8469

+0.8406

New Zealand Dollar/Dollar

USD=D3

$0.6616

$0.6664

-0.71%

-3.32%

+$0.6683

+$0.6590

Dollar/Norway

NOK=D3

8.7730

8.7205

+0.69%

-0.33%

+8.8160

+8.6995

Euro/Norway

EURNOK=

10.0554

9.9494

+1.07%

+0.42%

+10.0787

+9.9603

Dollar/Sweden

SEK=

9.1362

9.0863

+0.68%

+1.31%

+9.1718

+9.0641

Euro/Sweden

EUREK=

10.4711

10.4007

+0.68%

+2.32%

+10.4855

+10.3900

World exchange rateshttps://tmsnrt.rs/2RBWI5E

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Alexander Smith and Nick Zieminski)

((gertrude.chavez@thomsonreuters.com; 646-301-4124; Reuters Messaging: gertrude.chavez.reuters.com@reuters.net))

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