Dollar hurt as US Fed's Powell pledges patience over economy

New York

THE US dollar retreated against the euro on Friday, giving up all the gains logged after a robust US jobs report, following comments from Federal Reserve Chairman Jerome Powell that the US central bank will be sensitive to the downside risks the market is pricing in.

"We will be patient as we watch to see how the economy evolves," Mr Powell told the American Economic Association on Friday.

He said the Fed is not on a preset path of interest rate hikes and suggested that it could pause its policy tightening as it did in 2016.

"Powell's comments that the Fed is prepared to alter policy expectations quickly and flexibly are weighing on the US dollar and giving risk sentiment a boost," said Eric Viloria, FX strategist at Credit Agricole in New York.

The euro was 0.09 per cent higher at US$1.1401 against the greenback.

The data contrasts with reports this week signalling the global economy is slowing. China posted data showing factory activity contracted for the first time in 19 months in December, and there is evidence of weak manufacturing across much of Europe and Asia.

Against the Japanese yen, the US dollar was 0.7 per cent higher.

The Australian dollar recovered after being hit hard in Thursday's scramble for safety and was up 1.6 per cent.

Most emerging-market currencies rebounded. The South African rand and the Turkish lira each gained more than 2 percent against the greenback.

The Canadian dollar logged its third consecutive day of gains after touching an almost 20-month low earlier in the week.

Sterling jumped on Friday after suffering heavy losses spurred by fears of a global economic slowdown, but uncertainty about Brexit kept gains in check. REUTERS