The FOREX-Dollar Has Risen After a "Monster" Job Report.
The dollar rose on Friday after data showed that US employers added significantly more jobs in January than economists had predicted, potentially giving the Federal Reserve more leeway to continue raising interest rates.
According to the Labor Department's closely watched employment report, nonfarm payrolls increased by 517,000 jobs last month. The department revised December data to show 260,000 job gains rather than the previously reported 223,000.
After increasing by 0.4% in December, average hourly earnings increased by 0.3% in January. This reduced the year-on-year wage increase to 4.4% from 4.8% in December. Reuters polled economists predicted an increase of 185,000 jobs and a 4.3% increase in wages year on year.
The figure is a "monster number," according to Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
The dollar was last up 1.12% against a basket of currencies at 102.92, the highest since Jan. 12, and it is on track for its best day since Sept. 23.
The euro was down 0.98% to $1.08040. The dollar rose 1.82% against the Japanese yen to 131.20, its highest level since January 18 and on track for its best day since June 17.
Sterling fell 1.39% to $1.20550, its lowest level since January 6 and the worst day since December 15.
The unexpectedly strong payrolls figure reversed a Wednesday move in which traders increased bets that the US central bank would stop raising borrowing costs after a widely expected 25-basis-point increase in March.
"It looked like markets had the advantage after the Fed meeting - it was still pricing in a rate cut, they took interest rates down, and they took the dollar down, and now I think the Fed looks like they might have the upper hand again," Chandler said.
The Federal Reserve of the United States raised interest rates by 25 basis points on Wednesday, saying it had reached a critical juncture in the fight against high inflation, prompting investors to price in a more dovish path in the future.
Fed officials said in December that they expected to raise the central bank's benchmark overnight interest rate above 5%, but that they would need to keep it in restrictive territory for some time to bring inflation down sustainably.
However, traders predicted that the rate would fall below 5% and that the Fed would cut rates in the second half of the year as the economy slowed.
Traders now expect the Federal Reserve's policy rate to peak at 5.03% in June, up from 4.88% on Thursday afternoon.
Fears of a larger economic downturn may also weigh on markets as rate hike expectations rise.
"Whenever we see these big numbers, especially with the headlines, the fear of the Fed returns with a vengeance because people are probably afraid that the Fed will push things even further than they have, risking a car crash rather than a soft landing," said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Wisconsin.
The next major economic release in the United States that may provide additional clues to Fed policy is consumer price data for January, which is due on February 14.