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The dollar rises as job growth in the United States exceeds predictions

Image: Reuters Berita 24 English - On Friday, the dollar climbed against a basket of currencies after a better-than-expected US jobs report ...

Image: Reuters

Berita 24 English - On Friday, the dollar climbed against a basket of currencies after a better-than-expected US jobs report indicated a tight labor market, which might keep the Federal Reserve on a rate hike path.

The Labor Department reported in its carefully awaited employment report on Friday that nonfarm payrolls climbed by 390,000 jobs last month. Payrolls were expected to grow by 325,000 jobs in May, according to economists polled by Reuters.

Following the jobs report, the US Dollar Currency Index, which tracks the greenback against six other major currencies, was 0.4 percent higher at 102.16, up from 102.22. The index was up around 0.5 percent for the week.

Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California, said, "We had a really respectable nonfarm payrolls statistic."

"The solid employment statistics supports the assumption of more rate hikes in the second part of the year," Trang added.

The Federal Reserve has raised interest rates by three quarters of a percentage point this year, and most Fed policymakers expect another half-point hike at each of their next two meetings.

Loretta Mester, president of the Cleveland Federal Reserve Bank, said on Friday that she is waiting for "compelling" evidence that inflation has peaked before slowing the Fed's interest rate hikes from half-point increments in June and July, as policymakers expect.

Investors are split on the dollar, which remains at two-decade highs against a basket of peers.

The dollar is "pricing a safe-haven risk premium that is so severe it rarely has persisted over time and is now in the process of unwinding," according to George Saravelos, global head of FX research at Deutsche Bank.

The Fed's tightening cycle, according to bullish economists, is predicated on a stronger growth story than Europe's, especially after the Russian oil embargo, which could harm the euro zone economy.

The dollar climbed 0.8 percent to 130.85 yen, a more than three-week high, with the Japanese currency remaining close to a two-decade low hit in May as the Bank of Japan (BoJ) maintained its ultra-low interest rate policy stance.

On Friday, Bank of Japan Governor Haruhiko Kuroda said it was undesirable for prices to rise too much when household income growth remains weak. Kuroda has said the bank will not roll back its massive monetary stimulus because the recent rise in inflation was driven mostly by raw commodity costs and was likely temporary.

"Everyone, including the ECB, talks about increased rates and other things, but we aren't hearing that when it comes to the BOJ," said Silicon Valley Bank's Trang.

"I believe that is why the yen has made such an extreme move to the downside," Trang added.

Bitcoin, the world's largest digital currency by market value, fell 3.0 percent to $29,513.95, as it struggled to overcome a round of selling pressure that had pushed it below the $30,000 threshold.

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