The US dollar index jumped on Friday after a stronger-than-expected US payrolls report. The euro fell to $1.1157, and Fed rate hike expectations for December moved back towards 80%.
The US dollar index jumped on Friday and was on pace for its biggest daily percentage gain in seven weeks. A stronger-than-expected US payrolls report extended the move.
The index, which measures the greenback against a basket of currencies, surged 0.63% to 102.12. The euro tumbled 0.55% to $1.1157, and it was on pace for its biggest daily drop since October 7.
Payrolls top estimates and revive Fed hike bets
The Labor Department said US nonfarm payrolls jumped by 165,000 jobs last month, topping the 65,000 estimate of economists polled by Reuters. September's gain was revised upward to 60,000. The unemployment rate dipped to 4.1%.
However, the report gives the Federal Reserve latitude to continue to hike interest rates. According to the CME FedWatch Tool, market expectations for an increase of at least 25 basis points at the December meeting moved back up towards 80%. Those expectations had fallen to about 67% on Thursday as US equities plummeted.
Safe-haven demand and higher yields
The dollar was higher before the jobs data, buoyed by safe-haven demand as the selloff in AI stocks spread worldwide. After the report, Treasury yields moved higher: the 10-year yield rose 3.1 bps to 4.868%, and the 2-year yield rose 5.5 bps to 4.532%.
Eugene Epstein, head of trading and structured products at Moneycorp, described the dollar's shifting drivers. According to Epstein: "it’s not really rational" whether the dollar trades on a safe-haven basis or on an interest rate differential basis.
Central bankers and other currencies
New York Fed President John Williams said on Friday that inflation is too high and it is essential to bring it back to 2%. Separately, ECB chief economist Philip Lane said the central bank's main job is to ensure that any spillover from high energy prices to other prices is limited.
Sterling dropped 0.62% to $1.3366, and the Japanese yen weakened 0.3% against the greenback to 158.20.
Source: Investing.com (Reuters)
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