US dollar jumps after surprise May payrolls boost

THE US dollar rose on Friday (Jun 2) after May’s non-farm payrolls report showed employment numbers surged, while traders weighed the merits of the US Federal Reserve possibly skipping a rate hike in June. The report showed that payrolls in the public and private sectors increased by 339,000 in May, far outstripping the 190,000 forecast on average by economists polled by Reuters. May’s jump followed a 253,000 rise in April. Despite strong hiring, the jobless rate rose to 3.7 per cent from a 53-year low of 3.4 per cent in April.

The dollar index, which measures the US currency against six others, was last up 0.435 per cent at 103.980, on track for its largest daily percentage gain since mid-May. On the week, however, the dollar slipped 0.2 per cent, its biggest weekly decline since early May. The dollar index slid 0.62 per cent on Thursday, its worst day in almost a month, after Fed officials signalled the central bank will forgo an interest rate hike this month.

Money markets are pricing in a roughly 29 per cent chance of a June hike, down from near 70 per cent earlier in the week.

The US Senate’s passage of a bill on Thursday night to suspend the debt ceiling and avert a disastrous default removed a pillar of support for the dollar, which had paradoxically been a key beneficiary of the uncertainty because of its safe-haven status.

On Friday, Fitch Ratings said the United States’ “AAA” credit rating will remain on negative watch, despite the debt limit agreement, citing repeated political standoffs and last-minute suspensions of the ceiling before the deadline.

The dollar climbed 0.8 per cent against the yen during the week, on track for its largest weekly percentage rise since mid-May.

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Sterling rose 0.8 per cent against the dollar, on pace for the biggest weekly gain since late April. The euro was last down 0.45 per cent to US$1.07135, off its highest in around a week after a boost on Thursday from European Central Bank president Christine Lagarde, who said further policy tightening was necessary. The Australian dollar surged after Australia’s independent wage-setting body announced that it would raise the minimum wage by 5.75 per cent from Jul 1. The Aussie rose by as much as 0.93 per cent to US$0.663, its strongest since May 24, and was last up 0.59 per cent versus the greenback at US$0.661. REUTERS