Dollar eases from 20-year high as market digests jobs report

NEW YORK: The dollar edged back from a 20-year high on Friday as traders digested a report that showed the pace of hiring rose slightly more than expected in August, giving the Federal Reserve some wiggle room in how aggressively it hikes interest rates later this month.
Nonfarm payrolls rose by 315,000 jobs in August, data showed, topping the consensus forecast of 300,000 jobs by economists polled by Reuters, and marking the 20th straight month of job growth.
The dollar index, which tracks the currency against six counterparts, initially declined on the jobs report, but then reversed course and erased a chunk of its losses.
At 9:15 am Eastern time (1305 GMT), the US currency was down 0.319% at 109.24, but was still on track for its third-straight weekly gain.
“Overall what we’re seeing is the market is still bracing for potentially much more aggressive Fed tightening,” said Edward Soya, senior market analyst at Panda.
He noted that the jobs report showed average hourly wages beginning to fall, which could help dampen price pressures.
“Inflation is definitely starting to show some signs that it could be slowing, but there is no strong consensus on that,” he said.
Fed funds futures were unchanged after the jobs report and are pricing about a 75% chance that the Fed hikes rates by 75 basis points this month, according to Refinitiv data.
The US currency leaped to a fresh 20-year high on Thursday of 109.99 and has been riding high since Fed Chair Jerome Powell said at the Jackson Hole symposium in Wyoming last Friday that rates would need to be high “for some time” to combat inflation.
The euro retraced some of the previous day’s losses against the dollar and inched back above parity, up 0.62% to $1.0006.
The European Central Bank is due to meet next week, with money markets betting on an unprecedented 75 basis points hike.
Sterling edged up 0.02% versus the dollar to $1.1546, but remains down around 1.6% this week. Britain’s new prime minister will be announced on Monday, when the ruling Conservative Party’s leadership contest concludes, which could prompt further pound moves.
Against the rate-sensitive Japanese yen, the dollar was up 0.11% at 140.355 yen.
The dollar surged above 140 yen for the first time since 1998 on Thursday, and the yen fell to a fresh trough of 140.43 on the day.
Japan’s government will take “appropriate” action as needed, Japanese finance minister Shun Suzuki said on Friday.

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