Dollar soars across the board on robust U.S. jobs data

[October 04, 2014]  By Gertrude Chavez-Dreyfuss
 
 NEW YORK (Reuters) - The dollar climbed to a more than four-year peak on Friday after a report showing the U.S. economy created more jobs than expected last month, which suggested that the U.S. recovery was on a stable path.

The dollar index, a gauge of the greenback's value against six major currencies, was on track for its best yearly gain in nine years. The index was up 8 percent so far in 2014, posting weekly gains for a record 12 straight weeks.

Data from the Labor Department on Friday showed U.S. non-farm payrolls rose 248,000 last month and the jobless rate fell to 5.9 percent, the lowest since July 2008.

The only sore point, however, was the small growth in wages. Average hourly earnings rose just 2.0 percent. Before the last recession, hourly earnings often rose at above 3 percent per year.

"The U.S. economy is the only place that's growing. That's why the U.S. dollar is appreciating because there's very little confidence that U.S. growth is spreading anywhere else," said Roger Sadewsky, investment director for multi-asset investing at Standard Life Investments in Edinburgh, Scotland. Standard manages $337 billion in assets.

The dollar index hit a high of 86.74 <.DXY>, its strongest level since June 2010. It was last at 86.67, up 1.3 percent, its best daily gain since July 2013.

The greenback jumped to the day's high of 109.90 yen <JPY=> and last changed hands at 109.77, up 1.3 percent, its best day since December last year. Against the Swiss franc, the dollar hit a 15-month high and it was last at 0.9675 franc <CHF=>, up 1.4 percent.

The euro fell as low as $1.2501 <EUR=>, a more than two-year trough. It last traded at $1.2510, up 1.3 percent.

Still, the robust U.S. jobs report may not be a game-changer for the Federal Reserve. Some market participants still expect the Fed to hold fire when it comes to raising interest rates.

"I don't think this report will be enough to persuade the Fed to raise rates sooner than expected," said Sireen Haraji, currency strategist, at Mizuho Corporate Bank in New York.

"The fact that wage growth is flat suggests very little inflation and gives the Fed more time to be patient with hiking interest rates."

In the interest rate futures market, however, traders boosted bets the Fed could raise interest rates slightly earlier in 2015.

Rate futures contracts still show traders are betting the first Fed rate hike will come in July 2015, based on CME FedWatch, which tracks rate hike expectations using its Fed funds futures contracts.

But traders now see a 40 percent chance rates could rise as early as June 2015, up from 34 percent before the non-farm payrolls report.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama)

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