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Dollar gains versus yen after US jobs, manufacturing data

New York

THE dollar rose against the yen on Friday, posting its largest one-day gain in roughly a month, after January data showing the biggest number of US jobs created in 11 months and a rebound in US manufacturing.

But tame wage inflation as shown in the US nonfarm payrolls report kept the dollar's gains in check, analysts said. "The combination of a barnstorming headline number and the slight rise in unemployment suggests two things: America is creating jobs at a prodigious rate right now and there is some spare capacity to keep employers fed with more recruits in coming months," said David Lamb, head of dealing at Fexco Corporate Payments in Edinburgh.

But he noted that the jobs report was far from perfect, citing December's downward revision and the weak wage growth for such a tight US labour market.

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Beyond the headline jobs gains, the dollar has become more sensitive to wage inflation over the last year.

The report showed the US economy created 304,000 jobs, the highest in 11 months, easily superseding forecasts for 165,000 jobs. The unemployment rate, however, rose to a seven-month peak of 4 per cent, while average hourly earnings rose just 0.1 per cent in January, after rising 0.4 per cent in December.

Contracts tied to the Fed's policy rate had priced out any chance of a 2019 Fed rate hike after Fed Chairman Jerome Powell on Wednesday said the case for rate increases had weakened, and were pricing in about a one-in-three chance of a rate cut by the end of the year. But after the jobs data, traders reduced rate-cut bets, though they continue to bet against a rate hike.

In afternoon trading, dollar gained 0.6 per cent against the yen to 109.52, as the dollar index trading little changed on the day at 95.579. The dollar overall also benefited from a rise in the US manufacturing index to 56.6 in January, from 54.3 the month before. REUTERS