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Strong jobs report buoys US dollar as trade tensions rise

New York

Better-than-expected US employment data on Friday kept the dollar afloat, even as the European Union, Canada and Mexico are expected to retaliate to the import tariffs on steel and aluminium announced by President Donald Trump.

Domestic job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8 per cent, pointing to rapidly tightening labour market conditions. The US Labor Department's report also showed solid wage gains, making a rate hike in June near-certain, and increasing expectations of a fourth hike this year.

Against a basket of six currencies, the dollar rose half a per cent to a session high of 94.45. The move, however, was relatively muted compared to the blockbuster jobs numbers.

"The market was fairly pricing the Fed's path coming into the number, which was a shift from the beginning of the week where the market took out some of the rate hikes," said Charles Tomes, senior investment analysts at Manulife Asset Management.

Rising trade tensions also counterbalanced the fizzy jobs data and weighed down the dollar. Following Trump's announcement Thursday of new tariffs on imported metals, Canada, Mexico and the EU all said they plan to retaliate with levies on billions of dollars of US goods from orange juice and whiskey to blue jeans and Harley-Davidsons. REUTERS

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