Dollar rises after US job growth beats expectations

US dollar bills are shown in this illustration taken on February 14, 2022. REUTERS/Dado Ruvic/Illustration

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  • US dollar index rises 0.2%
  • Upbeat labor data supports the case for continued Fed tightening

NEW YORK, June 3 (Reuters) – The U.S. dollar rose against a basket of currencies on Friday, after a better-than-expected U.S. employment report pointed to a tight labor market that could prompt the Federal Reserve to raise rates. interest rates.

Nonfarm payrolls increased by 390,000 jobs last month, the Labor Department said Friday in its closely watched employment report. Economists polled by Reuters had forecast payrolls to rise by 325,000 jobs in May. read more

The US Dollar Currency Index, which tracks the dollar against six other major currencies, rose 0.2% to 101.91, after rising as high as 102.19 on the jobs report.

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The better-than-expected job gains are another sign the economy remains strong, while wage growth is beginning to moderate amid a rebound in the labor force, Michael Pearce, an economist, said in a note. US senior at Capital Economics.

“However, given that wage growth is still well above rates that are consistent with the Fed’s 2% inflation target, that won’t stop the Fed from continuing to raise rates by 50 basis points in the next meeting or two,” Pearce said.

The Fed has raised interest rates by three-quarters of a percentage point this year, and most Fed policymakers support raising interest rates another half a percentage point at each of its next two meetings.

Fed Vice Chair Lael Brainard said Thursday that high inflation is the US central bank’s “number one challenge.” Read More

Investors have mixed views on the dollar, which is still near two-decade highs against a basket of peers.

George Saravelos, global head of currency research at Deutsche Bank, said the dollar is “pricing in a safe-haven risk premium that is so extreme that it has rarely persisted over time and is now in the process of reversing.”

Optimistic analysts argue that the Fed’s tightening cycle is based on a stronger growth story than Europe’s, especially after the Russian oil embargo, which could hurt the euro zone economy.

The dollar rose 0.5% to a more than three-week high of 130.46 yen, with the Japanese currency not far off the two-decade low hit in May when the Bank of Japan (BoJ) maintained its rate policy. super low interest. .

BoJ Governor Haruhiko Kuroda, who has repeatedly said the bank will not reverse its huge monetary stimulus as the recent rise in inflation was mainly driven by commodity costs and is likely to be temporary, said on Friday that it was not It is desirable for prices to rise too high when household income growth remains weak. read more

In cryptocurrencies, bitcoin fell 2.5% to $29,676.05 as the world’s largest digital currency by market value continued to struggle to overcome a bout of selling pressure that has pushed it below the $30,000 level. .

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Information from Saqib Iqbal Ahmed; edited by jonathan oatis

Our standards: the Thomson Reuters Trust Principles.

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