NEW YORK (Reuters) - The dollar rose against the yen on Friday after stronger-than-expected U.S. jobs data raised chances the Federal Reserve may start paring its bond buying program sooner than expected.
U.S. employers added 203,000 new jobs in November and the jobless rate fell to a five-year low of 7.0 percent, the Labor Department said.
The central bank has been buying $85 billion in Treasury and mortgage-backed bonds each month to hold long-term borrowing costs down in a bid to spur a stronger economic recovery.
A reduction in these purchases would lift U.S. bond yields, boosting the dollar.
The dollar last traded 1 percent higher at 102.84 yen, its strongest daily gain since November 21. It earlier hit a session peak of 102.96 yen, not far from a six-month high of 103.37 yen set earlier in the week.
“A strong overall report, strong details as well. It keeps the December tapering risk alive from the Federal Reserve,” said Richard Franulovich, senior currency strategist at Westpac in New York.
Still, some analysts doubted the report was strong enough to push the Fed to move when policymakers meet on December 17-18. Many said the central bank was still likely to hold off reducing its purchases until January or March to ensure the economy was on solid ground.
“We feel this is consistent with material improvement as regards unemployment, however, we’ve seen no improvement yet in participation,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
“Non-farm payrolls number is probably not enough to persuade the Fed to taper in December. We still think the earliest they move is March.”
Economists believe the Fed will probably not want to pull back on its stimulus before lawmakers on Capitol Hill strike a deal to fund the government. That could come as soon as next week, however. Congressional aides have said negotiators were down to the final details as they tried to close a deal.
“The dollar continues to be driven by equity markets rather than the fixed income market,” said Sebastien Galy, foreign exchange strategist at Societe Generale in New York.
“That is why the U.S. dollar and New Zealand dollar are rising even as the broad dollar is mixed,” he said.
Currency speculators trimmed their bets in favor of the U.S. dollar in the latest week, according to data from the Commodity Futures Trading Commission and Thomson Reuters released on Friday.
The dollar’s early gains versus the euro were transitory, as the single currency was boosted by rising short-term interest rates in the euro zone, a day after the European Central Bank dampened hopes for an imminent easing move. <MMT/>
The euro hit a session low of $1.3627 after the U.S. jobs data before rebounding to hit a five-week high of $1.3706. It was last at $1.3704, up 0.3 percent on the day.
ECB chief Mario Draghi, after a policy meeting on Thursday, said the bank was ready to take fresh action to support a fragile recovery but he was spare with details, including whether the bank would cut bank deposit rates into negative territory.
Draghi also noted that liquidity in the banking system had improved since the last long-term cash injection and attached conditions for any repeat.
“Yesterday’s meeting could leave those betting on more indications of aggressive ECB easing disappointed,” said Valentin Marinov, currency strategist at Citigroup in London. “That could keep the euro supported against the dollar, yen and sterling.”
The dollar index .DXY, which tracks the greenback against a basket of six currencies, rose 0.1 percent to 80.314, according to Reuters data.
Additional reporting by Wanfeng Zhou, Gertrude Chavez-Dreyfuss and Steven C. Johnson in New York and Anirban Nag in London; Editing by Kenneth Barry