Dollar recovers from two-week low after U.S. jobs surprise

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The U.S. dollar rose from two-week lows on Friday, after data showed the world’s largest economy created far more jobs than expected, raising the chances of a larger Federal Reserve interest rate hike in March.

The dollar index, a gauge of its value against six major currencies, rose 0.3% to 95.597, after falling to a two-week low of 95.136 earlier amid a resurgent euro.

But the dollar was still down 1.7% on the week, on pace for its largest weekly percentage decline since November 2020.

Data showed U.S. nonfarm payrolls grew by 467,000 jobs last month. Data for December was revised higher to show 510,000 jobs created instead of the previously reported 199,000.

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

Market participants were prepared for a weaker-than-forecast reading given the decline in the ADP U.S. private payrolls report released earlier this week. That report showed a decline due to the impact of the Omicron coronavirus variant.

Average hourly earnings, a measure of wage inflation and a closely-watched measure, also rose 0.7% last month, and 5.7% on a year-on-year basis.

“You have average hourly earnings coming in much hotter than expected, which is just fuelling that theme of everything is just leading to more inflation,” said Edward Moya, senior market analyst, at OANDA in New York

“This report just screams inflation and inflationary pressures and is making anyone that was on the fence between the Fed raising 25 or 50 basis points in March now think they’re going to go 50 and that’s why you’re seeing Treasury yields really skyrocket,” he added.

U.S. two-year yields, which reflect interest rate expectations, rose to 1.2970%, the highest since late February 2020, at the start of the global coronavirus pandemic.

Following the U.S. jobs data, U.S. rate futures implied more than five rate hikes this year, or about 131 basis points in policy tightening. The probability of a 50 basis-point increase next month rose to about 32% from 18% before the data release.

The euro was still up on the day, rising 0.1% at $1.1455. It was up 1.7% on the week, on track for its best weekly performance since late March 2020, supported after a hawkish turn by the European Central Bank (ECB) rippled through markets.

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Currency bid prices at 9:28AM (1428 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 95.5180 95.3620 +0.17% -0.152% +95.6460 +95.1360

Euro/Dollar $1.1439 $1.1439 +0.00% +0.62% +$1.1483 +$1.1422

Dollar/Yen 115.2500 114.9950 +0.22% +0.11% +115.3900 +114.7700

Euro/Yen 131.84 131.53 +0.24% +1.17% +132.0000 +131.4600

Dollar/Swiss 0.9240 0.9200 +0.44% +1.30% +0.9255 +0.9195

Sterling/Dollar $1.3528 $1.3599 -0.52% +0.03% +$1.3614 +$1.3505

Dollar/Canadian 1.2763 1.2677 +0.67% +0.94% +1.2788 +1.2663

Aussie/Dollar $0.7068 $0.7140 -0.98% -2.74% +$0.7151 +$0.7052

Euro/Swiss 1.0568 1.0522 +0.44% +1.92% +1.0595 +1.0522

Euro/Sterling 0.8455 0.8412 +0.51% +0.65% +0.8469 +0.8406

NZ $0.6604 $0.6664 -0.87% -3.48% +$0.6683 +$0.6590

Dollar/Dollar

Dollar/Norway 8.7845 8.7205 +0.93% -0.09% +8.8160 +8.6995

Euro/Norway 10.0505 9.9494 +1.02% +0.38% +10.0787 +9.9603

Dollar/Sweden 9.1474 9.0863 +0.62% +1.44% +9.1718 +9.0641

Euro/Sweden 10.4653 10.4007 +0.62% +2.26% +10.4855 +10.3900

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Bansari Mayur Kamdar in Bengalaru; Editing by Alexander Smith)

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The U.S. dollar rose from two-week lows on Friday, after data showed the world’s largest economy created far more jobs than expected, raising the chances of a larger Federal Reserve interest rate hike in March.

The dollar index, a gauge of its value against six major currencies, rose 0.3% to 95.597, after falling to a two-week low of 95.136 earlier amid a resurgent euro.

But the dollar was still down 1.7% on the week, on pace for its largest weekly percentage decline since November 2020.

Data showed U.S. nonfarm payrolls grew by 467,000 jobs last month. Data for December was revised higher to show 510,000 jobs created instead of the previously reported 199,000.

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

Market participants were prepared for a weaker-than-forecast reading given the decline in the ADP U.S. private payrolls report released earlier this week. That report showed a decline due to the impact of the Omicron coronavirus variant.

Average hourly earnings, a measure of wage inflation and a closely-watched measure, also rose 0.7% last month, and 5.7% on a year-on-year basis.

“You have average hourly earnings coming in much hotter than expected, which is just fuelling that theme of everything is just leading to more inflation,” said Edward Moya, senior market analyst, at OANDA in New York

“This report just screams inflation and inflationary pressures and is making anyone that was on the fence between the Fed raising 25 or 50 basis points in March now think they’re going to go 50 and that’s why you’re seeing Treasury yields really skyrocket,” he added.

U.S. two-year yields, which reflect interest rate expectations, rose to 1.2970%, the highest since late February 2020, at the start of the global coronavirus pandemic.

Following the U.S. jobs data, U.S. rate futures implied more than five rate hikes this year, or about 131 basis points in policy tightening. The probability of a 50 basis-point increase next month rose to about 32% from 18% before the data release.

The euro was still up on the day, rising 0.1% at $1.1455. It was up 1.7% on the week, on track for its best weekly performance since late March 2020, supported after a hawkish turn by the European Central Bank (ECB) rippled through markets.

========================================================

Currency bid prices at 9:28AM (1428 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 95.5180 95.3620 +0.17% -0.152% +95.6460 +95.1360

Euro/Dollar $1.1439 $1.1439 +0.00% +0.62% +$1.1483 +$1.1422

Dollar/Yen 115.2500 114.9950 +0.22% +0.11% +115.3900 +114.7700

Euro/Yen 131.84 131.53 +0.24% +1.17% +132.0000 +131.4600

Dollar/Swiss 0.9240 0.9200 +0.44% +1.30% +0.9255 +0.9195

Sterling/Dollar $1.3528 $1.3599 -0.52% +0.03% +$1.3614 +$1.3505

Dollar/Canadian 1.2763 1.2677 +0.67% +0.94% +1.2788 +1.2663

Aussie/Dollar $0.7068 $0.7140 -0.98% -2.74% +$0.7151 +$0.7052

Euro/Swiss 1.0568 1.0522 +0.44% +1.92% +1.0595 +1.0522

Euro/Sterling 0.8455 0.8412 +0.51% +0.65% +0.8469 +0.8406

NZ $0.6604 $0.6664 -0.87% -3.48% +$0.6683 +$0.6590

Dollar/Dollar

Dollar/Norway 8.7845 8.7205 +0.93% -0.09% +8.8160 +8.6995

Euro/Norway 10.0505 9.9494 +1.02% +0.38% +10.0787 +9.9603

Dollar/Sweden 9.1474 9.0863 +0.62% +1.44% +9.1718 +9.0641

Euro/Sweden 10.4653 10.4007 +0.62% +2.26% +10.4855 +10.3900

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Bansari Mayur Kamdar in Bengalaru; Editing by Alexander Smith)