January 5, 2018 / 12:33 AM / 2 years ago

Dollar advances on rate hopes, undeterred by U.S. jobs report

NEW YORK (Reuters) - The dollar gained on Friday after a brief dip as investors reckoned a weaker-than-expected U.S. December non-farm payrolls report would not deter the Federal Reserve from raising interest rates multiple times this year.

A U.S. Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

U.S. nonfarm payrolls increased by 148,000 jobs last month. Economists were forecasting job gains of 190,000. Employment data for October and November data were revised to show 9,000 fewer jobs created than previously reported.

The dollar briefly slipped after the softer-than-forecast number, but has since regained momentum.

Fed funds futures have priced in a more than 60 percent chance the U.S. central bank will hike interest rates in March, according to CME’s Fedwatch.

“We do not see anything in the current report that will dissuade the consensus view that a hike is forthcoming in March,” said Marvin Loh, senior global market strategist, at BNY Mellon in Boston.

He added that while the report was disappointing given the significant headline miss, it was mostly consistent with the late stages of the U.S. economy’s current expansion.

“We have had eight years of steady employment gains, representing one of the longest expansionary periods that has pushed unemployment to near its lowest levels in 50 years,” Loh said.

Another bright spot in the U.S. December employment report was the rise in wage growth, analysts said.

Average hourly earnings rose 9 cents, or 0.3 percent, in December after gaining 0.1 percent in the prior month. That lifted the annual increase in wages to 2.5 percent from 2.4 percent in November.

In late trading, the dollar gained 0.3 percent against the yen to 113.14, while the euro fell 0.2 percent versus the dollar to $1.2042.

That put the dollar index, a measure of the greenback’s value against six major currencies, up 0.1 percent on the day.

Some analysts still expect dollar weakness to be the prevailing theme this year because other central banks such as the European Central Bank and Bank of Canada are on a tightening path as well, enhancing the allure of their currencies.

“The Fed is no longer the only game in town,” said Jane Foley, senior FX strategist at Rabobank in London. “There has been a shift in market focus away from the tightening cycle of the Fed to that of other central banks in the G10.”

Meanwhile, other data on Friday showed the U.S. services sector also cooled slightly in December. That non-manufacturing index data had little currency impact, however.

Reporting by Gertrude Chavez-Dreyfuss; Editing by Susan Thomas and Meredith Mazzilli

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