Karen Brettell
NEW YORK (Reuters) – The index jumped to a seven-week high in a broad rally on Friday after data showed employers added far more jobs in January than expected, reducing the chances of a near-term interest rate cut by the Federal Reserve.
Nonfarm payrolls increased by 353,000 last month, beating economists’ expectations of a gain of 180,000. Average hourly wages rose 0.6% after rising 0.4% in December.
It “exceeded expectations,” said Mark Chandler, chief market strategist at Bannockburn Global Forex in New York. “The market has further reduced the likelihood of a March rate cut and reduced the amount of cuts it expects the Fed will make this year.”
The dollar has weakened in recent days as Treasury yields fell, even after Fed Chairman Jerome Powell said Wednesday that a March rate cut was unlikely.
Treasuries benefited from safe-haven demand due to renewed concerns about the financial health of regional U.S. banks. But those concerns eased on Friday as shares of regional U.S. banks recovered slightly from a brutal two-day selloff, pushing yields higher.
Recent moves in the dollar and Treasury yields also largely reflect repositioning following a strong dollar in January and higher Treasury yields during the month.
“After the big move that happened throughout most of January, I would say there has been some adjustment in positions,” Chandler said. However, after Friday’s data, “I expect a more resilient dollar,” he added.
It reached 104.04, its highest level since December 12. The euro fell to $1.07810, holding just above Thursday’s $1.07800 level, its weakest since Dec. 13. The US dollar rose to 148.58 yen, just below the 148.80 level reached on Thursday. on January 19, which was the highest level since November 28.
Traders now estimate the likelihood of a rate cut in March at 21%, up from 38% on Thursday, and the likelihood of a rate cut at 75% in May, up from 94%, according to CME’s FedWatch Tool.
Sterling fell to $1.26140, its lowest level since January 17. The British currency rose on Thursday after the Bank of England kept interest rates at a nearly 16-year high on Thursday and retreated from the possibility of a near-term rate cut.
The Australian dollar fell to a 10-week low of $0.65035.
JPMorgan analysts Jason Hunter and Marko Kolanovic said in a report Friday that the company is trying to orchestrate a near-term bullish reversal at “critical support” around $0.65. If it fails to clear resistance at $0.664 to $0.6657 and sees further weakness, it could test support at $0.617 to $0.6296 area next, they said.
In cryptocurrencies, Bitcoin fell 0.19% to $43,020.