The US dollar on Friday posted its biggest daily percentage drop in six weeks on the heels of last month’s US jobs report that missed expectations, but it was still seen as strong enough to keep the US Federal Reserve’s tightening path intact.
The US dollar index fell 0.6 percent to 95.74, its biggest drop since Nov. 26, when concerns about the Omicron variant of SARS-CoV-2 began to rattle markets. The index fell 0.2 percent for the week.
In Taipei, the New Taiwan dollar on Friday fell against the greenback, losing NT$0.039 to close at NT$27.690, unchanged from Thursday last week.
The US Department of Labor on Friday said nonfarm payrolls rose by 199,000 last month, well short of the 400,000 estimate.
However, analysts noted underlying data in the report appeared sturdier, with the unemployment rate falling to 3.9 percent against expectations of 4.1 percent, while earnings rose by 0.6 percent, indicating tightness in the labor market.
The report also increased expectations that the Fed would begin to hike interest rates at its March meeting, with futures on the federal funds rate implying a 90 percent chance of a hike, up from 80 percent on Wednesday.
“While the headline might have fallen short of the consensus, the consensus doesn’t matter much to the Fed. For them, this probably justifies their hawkish tilt,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Menomonee Falls, Wisconsin. “We’ll have to see how whether they walk the walk of their hawkish talk, but the odds are rising for a rate hike in March or May and a balance sheet run-off beginning later next year.”
The euro rose 0.62 percent to US$1.1361 as it strengthened against the greenback in the wake of the payrolls report, after showing little reaction to data showing that eurozone inflation rose to 5 percent last month.
Eurozone policymakers have said they expect inflation to gradually slow down this year and a rate hike would likely not be needed this year.
The Japanese yen strengthened 0.22 percent versus the greenback to ￥115.59 per US dollar. The yen has taken the brunt of the damage while the greenback has strengthened recently, with the US dollar hitting a five-year high versus the yen earlier this week.
Sterling posted its third straight weekly gain against the US dollar, trading at US$1.3592, up 0.47 percent on the day, even after data showed growth in the UK’s construction sector cooled last month as the Omicron variant of SARS-CoV-2 spread, nearly matching a two-month high reached on Wednesday.
Despite the rapid spread of the Omicron variant, investors have increasingly viewed it as unlikely to derail the global economy or more aggressive actions by central banks.
Additional reporting by CNA, with staff writer
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