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US dollar holds gain as Fed rate-hike odds weather hiring slowdown

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The US dollar held a gain versus the yen from Friday as speculation the Federal Reserve will raise interest-rates this year remained intact after the pace of US payrolls growth slowed.

[TOKYO] The US dollar held a gain versus the yen from Friday as speculation the Federal Reserve will raise interest-rates this year remained intact after the pace of US payrolls growth slowed.

The greenback was near a one-month high against the Japanese currency touched on Friday after the US government reported weaker-than-forecast August jobs growth and wages data.

Average monthly hiring from June was about 240,000, nearly matching the average prior to the rate increase in December, suggesting little change in the labor market trend, Naoto Ono, an analyst in Tokyo at Ueda Harlow Ltd, which provides margin-trading services, wrote in a note to clients.

"Even if there are some corrections to the US dollar's strength, adjustments will be shallow as the currency remains supported by rate-hike expectations," Mr Ono wrote.

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"The jobs report was supportive of a rate increase this year." The US currency was little changed at 103.96 yen as of 8:53am in Tokyo from 103.92 in New York Friday when it reached 104.32, its highest since July 29.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed after gaining 1.5 per cent over the past two weeks.

US nonfarm employment climbed by 151,000 last month, compared with a median forecast of 180,000 in a Bloomberg survey. Average hourly earnings rose 0.1 per cent from a month earlier, missing a projection of 0.2 per cent. The unemployment rate was 4.9 per cent for a third month, while economists had predicted 4.8 per cent.

Futures showed the likelihood of a September rate increase at 32 per cent and 59 per cent by December, compared with 34 per cent and 60 per cent on Thursday, the day before the employment data.

The Fed rate calculation is based on the assumption that the effective fed funds rate will trade at the middle of the new Federal Open Market Committee target range after the increase.

BLOOMBERG

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