Greenback suffers biggest drop in 6 weeks after US jobs report

New York

THE US dollar was on track for its biggest daily percentage drop in 6 weeks on Friday (Jan 7) on the heels of the December US jobs report that missed expectations, but it was still seen as strong enough to keep the Federal Reserve's tightening path intact.

The dollar index fell 0.546 per cent at 95.734, and was poised for its biggest drop since Nov 26, when concerns about the Omicron Covid-19 variant began to rattle markets. Even with Friday's weakness, the dollar was still on track for a slight weekly gain, its first in 3 weeks.

The Labor Department said non-farm payrolls rose by 199,000 last month, well short of the 400,000 estimate. But analysts noted underlying data in the report appeared sturdier, with the unemployment rate falling to 3.9 per cent against expectations of 4.1 per cent while earnings rose by 0.6 per cent, indicating tightness in the labour market. The report also increased expectations the Fed will begin to hike interest rates at its March meeting, with futures on the federal funds rate implying a 90 per cent chance of a hike, up from 80 per cent on Wednesday.

On Wall Street, the benchmark S&P 500 SPX was modestly lower while the yield on the benchmark 10-year US Treasury note touched 1.80 per cent, its highest since January 2020. The euro was up 0.62 per cent to US$1.1361 as it strengthened against the greenback in the wake of the payrolls report, after showing little reaction to data showing eurozone inflation rose to 5 per cent in December.

The Japanese yen strengthened 0.22 per cent versus the greenback at 115.59 per dollar. The yen has taken the brunt of the damage while the greenback has strengthened recently, with the dollar hitting a 5-year high versus the yen earlier this week.

Sterling was poised for its third straight weekly gain against the dollar and was last trading at US$1.3592, up 0.47 per cent on the day. REUTERS