NEW YORK, Feb 2 (Reuters) - The dollar jumped on Friday against all major currencies after data showed that employers added far more jobs in January than expected, reducing the chances of near-term Federal Reserve interest rate cuts.
Nonfarm payrolls increased by 353,000 last month, beating economists' expectations for a gain of 180,000. Average hourly earnings increased 0.6% after rising 0.4% in December.
It “blew away expectations,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “The market has further cut the chances of a March cut and reduced the amount of cuts [it expects] the Fed will deliver this year.”
The dollar has weakened in recent days in line with falling Treasury yields, even after Fed Chair Jerome Powell on Wednesday said that a March rate cut was unlikely. Treasuries have benefited from safe haven demand due to renewed concerns about the financial health of U.S. regional banks.
But the move in bonds and the dollar in large part also reflect repositioning, following a strong January for the greenback and higher Treasury yields during the month.
“After a big move in most of January, I would say there was some position adjusting,” said Chandler, adding that, following Friday’s jobs data, “I’m looking for a firmer dollar tone.”
The dollar index was last at 103.73, up from around 103.00 before the data and up 0.67% on the day. The euro fell to $1.08065, from around $1.08830 earlier. The greenback rose to 147.86 yen, from around 146.65 before the data .
Traders are now pricing in an 18% chance of a rate cut in March, down from 38% on Thursday, and a 67% probability for May, down from 94%, according to the CME Group’s FedWatch Tool.
(Reporting By Karen Brettell; Editing by Kevin Liffey)
