Dollar up as solid US jobs report sets stage for Fed hikes

The dollar rose on Friday, boosted by a solid US jobs report, after tumbling the day before on mixed US economic data and apparent action by Chinese authorities to shore up the yuan. The dollar gained broadly against major currencies after the US non-farm payrolls report showed a slowing in hiring in December but an increase in wages, setting the economy up for further interest rate increases from the Federal Reserve this year.
October and November figures were revised to show 19,000 more jobs added than previously reported. The US economy created 2.16 million jobs in 2016 with the year-on-year increase in average hourly earnings rising to 2.9 percent. "Obviously the focus (of the market) was more on the revision from last month because if you just look at the headline number it was weaker than expected," said Sireen Harajli, currency strategist at Mizuho. "But if you look at it overall it essentially is a flat reading, so it's pretty much in line with data we're seeing in the US Growth continues to be moderate."
The dollar rose 1.5 percent against the yen, hitting a session high of 117.18 yen, headed for a weekly gain against the Japanese currency. The euro fell to a low of $1.0525, but was still headed for its third straight weekly rise against the greenback. Sterling slipped after two days of gains and ahead of a decision in the next week or two on parliament's role in Brexit negotiations, while Mexico's peso was boosted by a second straight day of currency intervention from its central bank.
A Reuters poll on Friday showed that the dollar is expected to keep strengthening against the euro in the months ahead with investors putting even chances on reaching parity this year. The dollar index, which measures the greenback against six major currencies, was up 0.7 percent at 101.92. It fell for two straight days after touching a 14-year high of 103.820 Tuesday.
The dollar suffered its worst daily percentage drop since July on Thursday after unimpressive US employment data and a surge in the Chinese yuan as Beijing made moves to shake out large bets against its currency. Friday's strong rebound put the dollar on pace to end the week little moved from its open this week. "The data helped, clearly," said Vassili Serebriakov, FX strategist at Credit Agricole. "But the market consensus view has not changed, investors are still bullish on the dollar."