The US dollar rebounded from a three-month low against the euro after a US employment report showed wage growth that exceeded estimates, bolstering the case for the US Federal Reserve to continue raising interest rates this year.
The greenback climbed versus most of its major peers after data showed average hourly earnings rose 0.5 percent, hinting at a pickup in inflation toward the central bank’s 2 percent target. The jobs data provided temporary relief for the dollar, which posted the biggest two-day decline since 2009 this week on concern slowing economic growth may force the central bank to reverse its tightening course.
“The US dollar is moving in reaction to the firmer result for average hourly earnings and the drop in the unemployment rate,” said Bipan Rai, director of foreign-exchange strategy in Toronto at Canadian Imperial Bank of Commerce’s CIBC World Markets unit. “Both of which suggest that the market may have gotten a bit ahead of itself in terms of Fed expectations over the past few sessions.”
The greenback’s gains have stalled this year, as evidence piled up that the world’s biggest economy will not escape slowdowns from China to Canada and Brazil.
That is a departure from the trend in the past two years as investors bet the Fed would tighten monetary policy as the economy improved in contrast with other central banks that were carrying out unprecedented stimulus.
The US currency added 0.5 percent to US$1.1158 per euro at 5pm in New York. It rose 0.1 percent to ¥116.87. The Bloomberg Dollar Spot index, which tracks the US currency against 10 global peers, strengthened 0.6 percent, trimming its weekly loss to 1.9 percent.
The nation’s jobless rate fell to 4.9 percent, an eight-year low, even as the US created 151,000 jobs, trailing the 190,000 forecast by economists surveyed by Bloomberg.
The British pound slipped 1.2 percent in the week to £76.99 per euro as of 5:15pm London time on Friday, having depreciated in 10 out of the past 11 weeks. It fell on Friday to US$1.4469, paring its weekly gain to 1.6 percent.
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