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Monday, 9 January 2017

Dollar up as solid U.S. jobs report sets stage for Fed hikes


The dollar rose on Friday, boosted by a solid U.S. jobs report, but was headed for a second straight weekly loss after tumbling the day before on mixed U.S. economic data and apparent action by Chinese authorities to shore up the yuan.

The dollar gained broadly against major currencies after the U.S. non-farm payrolls report showed a slowing in hiring in December but an increase in wages, setting the economy up for further interest rate increases from the Federal Reserve this year.

The dollar hit a session high against the yen JPY= of 116.74 yen, while the euro EUR=, after hitting a one-week high immediately after the report's release, fell to a session low of $1.0536.

October and November figures were revised to show 19,000 more jobs added than previously reported. The U.S. economy created 2.16 million jobs in 2016 with the year-on-year increase in average hourly earnings rising to 2.9 percent.

"Obviously the focus (of the market) was more on the revision from last month because if you just look at the headline number it was weaker than expected," said Sireen Harajli, currency strategist at Mizuho. "But if you look at it overall it essentially is a flat reading, so it’s pretty much in line with data we’re seeing in the U.S. Growth continues to be moderate."

Sterling GBP=D4 slipped after two days of gains and ahead of a decision in the next week or two on parliament's role in Brexit negotiations, while Mexico's peso MXN= was boosted by a second straight day of currency intervention from its central bank.

A Reuters poll on Friday showed that the dollar is expected to keep strengthening against the euro in the months ahead with investors putting even chances on reaching parity this year.

The dollar index, which measures the greenback against six major currencies, was at up 0.4 percent at 101.92 .DXY after having set a 14-year high of 103.820 three days ago.

The dollar had slipped on Thursday following unimpressive U.S. employment data and a surge in the Chinese yuan as Beijing made moves to shake out large bets against its currency.


There was more action in Beijing overnight as borrowing rates for the offshore yuan CNH= jumped to their highest in a year, with the yuan headed for its largest one-week gain since it was introduced in 2010.

The Australian AUD= and New Zealand NZD= dollars briefly hit three-week highs overnight after Australia posted its first trade surplus in almost three years in November.


Reference: Dion Rabouin

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