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Currency Trading: Jobs Data Give Lift To Dollar -- WSJ

3 Feb 2018 7:32 am
By Ira Iosebashvili 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 3, 2018).

The dollar rose after stronger-than-expected U.S. jobs data.

The Wall Street Journal Dollar Index, which measures the U.S. currency against a basket of 16 others, advanced 0.7%, to 83.58. The currency held steady as the Dow industrials posted their biggest one-day percentage decline since June 2016, and commodity prices tumbled.

U.S. hiring remained robust in January and wage growth picked up to its strongest pace since the recession. Nonfarm payrolls rose a seasonally adjusted 200,000, the Labor Department said Friday. Economists surveyed by The Wall Street Journal had expected 177,000 new jobs in January.

Weeks of strong U.S. data have bolstered the case for the Federal Reserve to raise rates at a faster pace this year. Expectations of tightening monetary policy tend to boost the dollar, as rising rates make the currency more attractive to yield-seeking investors.

Based on Friday's jobs numbers, "it looks more and more likely that we will have to revise up our call for three Fed rate hikes this year to four," analysts at ING wrote in a note to clients.

The dollar is down 7.5% over the past year, as expectations that central banks abroad may tighten monetary policy faster than expected draws investors into the euro and other currencies. The Wall Street Journal Dollar Index fell 3.2% last month, its biggest monthly decline since March 2016.

However, the currency's rapid descent could lead to at least a temporary rebound if investor sentiment shifts, some analysts said.

"We've obviously moved down at a fair speed, and if things turned around they could turn around quite viciously," said Steven Barrow, head of G10 strategy at Standard Bank.

Longer term, the dollar remains vulnerable. Investors remain focused on tightening monetary policy in the eurozone and other regions, and many believe the Trump administration would be happy with the trade advantages a weaker currency could give.

Mr. Barrow forecasts the euro will hit $1.35 against the dollar by year-end, from around $1.2459 on Friday.

Write to Ira Iosebashvili at ira.iosebashvili@wsj.com

(END) Dow Jones Newswires

February 03, 2018 02:32 ET (07:32 GMT)

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