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US dollar rises, US jobs data not expected to derail Fed

[NEW YORK] The US dollar edged higher against a basket of major rivals on Friday after US jobs data was seen as decent enough to support the possibility of another interest rate increase from the Federal Reserve this year.

Traders initally sold the US dollar in a knee-jerk reaction to Labor Department data showing nonfarm payrolls increased by 156,000 last month, below expectations of economists polled by Reuters for a gain of 180,000.

A one-tenth of a percentage point uptick in the unemployment rate to 4.4 per cent and tepid wage growth also briefly sent the US dollar lower.

The US dollar reversed its losses and pushed higher, however, with the euro last down 0.4 per cent at US$1.1866 after briefly hitting a session high of US$1.1979.

The US dollar index, which measures the greenback against a basket of six major currencies, was last up 0.1 per cent at 92.801 after initially plunging 0.5 per cent.

"If the markets are discounting a December (Fed rate hike) just on the back of this, it's probably premature," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Ltd in New York.

The US dollar also recovered since it was oversold heading into the employment report, said Alfonso Esparza, senior currency analyst at Oanda in Toronto.

The US dollar index is coming off its sixth consecutive monthly decline, although August's drop of 0.2 per cent was the smallest since the streak began in March. Through August, the index had declined 9.3 per cent, the worst first eight months to a year since 1986.

The euro hit a more than 2-1/2-year high on Tuesday of US$1.2069 after European Central Bank President Mario Draghi made no mention of the euro's strength at a gathering of central bankers last Friday.

The US dollar index was set to gain just 0.1 per cent for the week after posting its biggest percentage decline in more than a month, of 0.7 per cent, last week.

"The (Fed) rate hike is still sort of a question mark, but (Friday's jobs data) wasn't that big a miss to take it totally off the table for the rest of the year," said Oanda's Esparza.

The US dollar was last up 0.2 per cent against the yen at 110.21 yen after slumping to a session low of 109.57 yen just after the jobs data. The US dollar was set to post its biggest weekly gain against the yen since early July, of about 0.8 per cent.