Dollar advances to four-month high

The dollar vaulted to a four-month peak against of basket of major currencies on Friday, propelled by a strong US non-farm payrolls report that followed a spate of upbeat economic data this week, a scenario expected to keep interest rates steady.

The dollar index posted its largest weekly percentage gain in more than two years. The US currency also hit a two-month high against sterling and the Canadian dollar, a six-week peak versus the Swiss franc, and a four-month high against the euro.

However, the dollar fell against the safe-haven yen amid persistent fears about the coronavirus outbreak in China, although investors were focused a little more on US payrolls data for much of the New York session.

Data showed US nonfarm payrolls increased by 225,000 jobs last month, with employment at construction sites increasing by the most in a year given milder-than-normal temperatures. Economists polled by Reuters had forecast payrolls would rise by 160,000 jobs in January.

"Today's positive prints confirmed that the US job market is firing on all cylinders, the US economy is expanding," said Olivier Konzeoue, FX Sales Trader at Saxo Markets in London. "The Federal Reserve looks set to stay put for the time being."

In afternoon trading, the dollar index rose 0.2% to 98.687. The dollar was also up 0.3% against the Swiss franc at 0.9772 franc, gained 0.1% versus the Canadian dollar to C$1.3301 and climbed 0.3% versus sterling, which fell to $1.2887.

The greenback, though, fell 0.2% against the yen to 109.76 yen on what analysts said was more a safe-haven play for the Japanese currency in the wake of the coronavirus outbreak. The Fed, in its latest monetary policy report to the US Congress released on Friday, cited the fallout from the spreading virus as one of the risks to the US economic outlook.

"This is the first major hint that the Fed is concerned that the virus could possibly derail global growth," said Edward Moya, senior market analyst, at OANDA in New York. The death toll in mainland China reached 637 on Friday, with a total of 31,211 cases, WHO chief Tedros Adhanom Ghebreyesus said on Friday in Geneva. The virus has spread globally, with 320 cases in 27 countries and regions outside mainland China, a Reuters tally of official statements shows.

Across the Atlantic, the euro fell to its lowest since October on Friday after German industrial output recorded its biggest decline in a decade in December. The European single currency dropped to as low as $1.0943, and was last down 0.3%. It has lost 1.3% since Monday, its worst weekly loss since November.

The offshore yuan was down 0.4% at 7.005 yuan per dollar, though it was still set for a small gain this week thanks to stimulus from China's central bank and Beijing's announcement of tariff cuts on US imports.