Traders are now pricing in the Fed's policy rate to peak at 4.98% in June, up from 4.88% on Thursday afternoon. The dollar was last up 0.72% at 102.51 on the day against a basket of currencies . The euro fell 0.57% to $1.08490. The dollar gained 1.29% against the Japanese yen to 130.39. (Reporting by Karen Brettell; Editing by Kirsten Donovan and Paul Simao)
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By Karen Brettell
NEW YORK, Feb 3 (Reuters) - The dollar jumped on Friday
after data showed that U.S. employers added significantly more
jobs in January than economists expected, potentially giving the
Federal Reserve more leeway to keep hiking interest rates.
The Labor Department's closely watched employment report
showed that nonfarm payrolls surged by 517,000 jobs last month.
Data for December was revised higher to show 260,000 jobs added
instead of the previously reported 223,000.
Average hourly earnings rose 0.3% after gaining 0.4% in
December. That lowered the year-on-year increase in wages to
4.4% from 4.8% in December. Economists polled by Reuters had
forecast a gain of 185,000 jobs and a 4.3% year-on-year jump in
wages.
The surprisingly strong payrolls number reversed a move from
Wednesday, when traders raised bets that the U.S. central bank
would stop hiking borrowing costs after a widely expected
25-basis-point increase in March.
"After the Fed meeting it looked like markets had the
advantage - it was still pricing in a rate cut, they took
interest rates down, and they took the dollar down, and now I
think 48 hours later the Fed looks like they might have the
upper hand again," said Marc Chandler, chief market strategist
at Bannockburn Global Forex in New York.
The U.S. central bank on Wednesday raised rates by 25 basis
points and said it had turned a key corner in the fight against
high inflation, leading investors to price in a more dovish path
going forward.
Fed officials in December said they expected to raise the
central bank's benchmark overnight interest rate above 5% and
they have stressed they will need to hold it in restrictive
territory for a period of time in order to sustainably bring
down inflation.
But traders have bet that the rate will peak below 5% and
that the Fed will cut rates in the second half of the year as
the economy slows.
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