Safe-haven greenback jumps after job growth slows in the US

London

THE US dollar on Friday rose to its highest in a week as investors bought into the safe-haven asset after the US Labor Department reported that job growth slowed further in August with financial assistance from the government virtually depleted, threatening the economy's recovery from the Covid-19 pandemic.

Programmes to help businesses pay wages have either lapsed or are on the verge of ending and a US$600 weekly unemployment supplement expired in July. Economists credited government largesse for the sharp rebound in economic activity after it nearly ground to a halt following the shuttering of businesses in mid-March.

The safe-haven dollar's bounce comes after weeks of losses.

The greenback fell to an April 2018 low of 91.74 on Tuesday after the US central bank overhauled its policy framework last week, which would allow it to keep rates lower for longer periods, a negative for the dollar.

Despite the rally in the second half of the week, investors see a downward trajectory for the dollar in the longer term.

"Dollar rallies are going to fade unless there is a major surprise on the risk front," said Mazen Issa, senior foreign exchange strategist at TD Securities.

The dollar's downtrend will continue for at least another three months due to the outlook for the Fed's monetary policy, a Reuters poll of analysts showed on Friday.

The drop in the dollar at the start of the week pushed the euro above the key US$1.20 level for the first time since 2018. But those gains quickly faded after European Central Bank chief economist Philip Lane said the eurodollar exchange rate "does matter" for monetary policy, suggesting that the euro's rise had come too fast and strong for the ECB's liking.

"The focus is going to be on what happens at the ECB meeting next week," said Mr Issa.

Against a basket of currencies, the dollar was trading up 0.37 per cent to 93.179. On a weekly basis, it is up about one per cent, its biggest weekly rise since the first week of April. The euro was trading down 0.43 per cent to US$1.180. REUTERS