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Dollar falls as jobs report disappoints

New York

THE dollar fell against the euro on Friday, after data showed US employers hired fewer workers than forecast in November, raising worries that US growth is moderating and the Federal Reserve may stop raising rates sooner than previously thought.

Fed policymakers are still widely expected to raise interest rates again at their Dec 18-19 meeting, but the focus is on how many rate hikes will follow in 2019.

"This was slightly disappointing on the headline level, but wage growth coming in as expected keeps the Fed on track to raise rates in December," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto. "The overall effect has been a sell-off in the dollar, largely in a reaction to a lower expectation for rate hikes in 2019," he said.

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The euro was 0.32 per cent higher against the dollar.

An index that tracks the greenback versus the euro, yen, sterling and three other currencies was down 0.24 per cent at 96.579.

Federal Reserve chairman Jerome Powell said last week that US interest rates were nearing neutral levels, which markets interpreted as signalling a slowdown in rate rises. The US central bank is flagging a turning point in monetary policy, as a Fed policymaker on Friday backed interest rate hikes in the "near term" but nodded to increasingly less certainty ahead.

"The dollar looks set for more choppy trade as markets seek answers to whether the US economy is stronger or weaker than it thinks," Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, said in a note.

Falling US yields, which have been chipping away at the yield differential advantage the greenback enjoyed earlier this year, have been another factor impeding the dollar's advance recently. On a weekly basis, the dollar was down about 0.7 per cent, set for its biggest drop in more than two months.

Sterling fell on Friday and was headed for a fourth consecutive week of losses as British Prime Minister Theresa May pressed ahead with plans for a parliamentary vote on her Brexit deal with the European Union, despite warnings it could topple her government.

The Canadian dollar strengthened against its US counterpart as higher oil prices and data showing a record increase in domestic jobs bolstered expectations for further interest rate hikes from the Bank of Canada. REUTERS