US dollar clings above 3-1/2-months lows; loonie stands tall

[SINGAPORE] The US dollar held steady above a recent 3-1/2 month low against a basket of major peers on Monday, after data showing slower US jobs growth did little to dent expectations for further Federal Reserve interest rate increases this year.

The US dollar's index against a basket of six major currencies last stood at 91.919, just above lows of 91.751 set on Jan 2.

US nonfarm payrolls increased by 148,000 jobs last month, after a surge of 252,000 in November, data released on Friday showed. Economists polled by Reuters had forecast payrolls rising 190,000 in December.

On Friday, the US dollar initially slipped after the smaller-than-forecast rise in payrolls, but later regained some of its composure.

"The recent trend of dollar-selling is taking a bit of a pause," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, adding that the US dollar drew some support after US Treasury yields nudged higher on Friday.

The US currency has begun 2018 on the defensive, after the US dollar index fell about 9.9 per cent in 2017, its weakest performance since 2003.

A synchronised global recovery has prompted other countries' central banks to start moving towards tighter monetary policy in recent months, helping bolster their currencies.

After the US jobs data, traders of US short-term interest rate futures continued to bet the Fed would raise interest rates two times this year, including a probable rate hike in March.

Comments by some Fed officials on Friday and over the weekend suggested the US central bank remained on track to raise interest rates further in 2018.

San Francisco Fed President John Williams told Reuters in an interview on Saturday that the Fed should raise interest rates three times this year given the already strong economy will get a boost from tax cuts, and can tighten more or less aggressively if needed.

Federal Reserve Bank of Cleveland President Loretta Mester told Reuters in an interview on Friday she expects roughly four interest rate hikes this year, as US economic growth picks up and unemployment remains low.

Against the yen, the US dollar firmed 0.1 per cent to 113.12 yen, having traded in a range of roughly 112.00 yen to 113.75 yen over the past month.

The euro edged up 0.1 per cent to US$1.2045. Having started the year on a firm footing, the common currency rose to US$1.2089 on Thursday, nearing a 2-1/2 year peak of US$1.2092 set in early September.

The Canadian dollar last traded at C$1.2385 per US dollar, up 0.2 per cent from late US trade on Friday.

The loonie had jumped to a three-month high of C$1.2355 on Friday, as market expectations for Canada's central bank to raise interest rates in January surged as Canadian jobs data blew past market expectations.

REUTERS