Dollar recovers from brief dip after weak US payrolls report

New York

THE dollar turned higher against a basket of major currencies on Friday after a dismal December US payrolls raised expectations for further stimulus measures to prop up an economy battered by Covid-19 and its related government lockdown measures.

The US Labor Department said that nonfarm payrolls decreased by 140,000 in December, the first decline in eight months, well below expectations that called for a still-weak increase of 71,000 jobs. The unemployment rate was 6.7 per cent. Economic data during the week leading up to Friday's report indicated a stalling labour market.

The greenback had been climbing from a nearly three-year low on Thursday as a rise in US yields helped fuel the unwinding of bearish bets on the currency, with traders taking profits against the euro in particular.

After a brief pullback after the release of the data, the greenback resumed its path higher, as expectations grew for additional stimulus measures to help buttress the economy until vaccine rollouts allow for the easing of lockdown measures.

The dollar index last rose 0.35 per cent at 90.117 after touching a high of 90.252, it's best level since Jan 1.

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US President-elect Joe Biden said the jobs report shows Americans needed more immediate relief and that taking action now would help the economy even with deficit financing, including the US$2,000 stimulus cheques.

The Democrats' Senate seat wins give Mr Biden latitude to push through more spending, which some analysts predict will fuel risk appetite and be negative for bonds and the dollar, although a strongly bearish consensus outlook for the greenback at the end of 2020 has eased somewhat.

The dollar index dropped 7 per cent in 2020 and as much as 0.9 per cent in the first few days of the new year on expectations of US fiscal stimulus.

But since hitting its lowest level since March 2018, the greenback has found some footing, climbing as much as 1.2 per cent over two sessions.

Both the euro and the pound weakened against the dollar as it gained ground. The euro was last down 0.5 per cent to US$1.2209 while sterling was last trading at US$1.3562, down 0.01 per cent on the day. REUTERS