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Dollar rises; US jobs data not expected to derail Fed

Key Points
  • U.S. employers add 156,000 jobs in August.
  • December Fed rate increase still seen as possible.
Secretary Mnuchin: No question debt ceiling will be raised

The U.S. dollar edged higher against a basket of major rivals on Friday after U.S. jobs data was seen as sufficiently strong to support the possibility of another interest rate increase from the Federal Reserve this year.

Traders initially sold the dollar in a knee-jerk reaction to Labor Department data showing nonfarm payrolls increased by 156,000 last month, below expectations of economists polled by Reuters for a gain of 180,000.

A one-tenth of a percentage point uptick in the unemployment rate to 4.4 percent and tepid wage growth also briefly sent the dollar lower.

Dollar Index 1 Minute Intraday

Source: FactSet

The dollar reversed its losses and pushed higher, however, with the euro last down 0.39 percent at $1.1862 after briefly hitting a session high of $1.1979. The dollar index, which measures the greenback against a basket of six major currencies, was last up just 0.17 percent at 92.83 after initially plunging 0.5 percent.

"This is not out of line with the Fed's thinking on the economy," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie in New York. "If the markets are discounting a December (Fed rate hike) just on the back of this, it's probably premature."

Wizman noted that manufacturing and construction payrolls were strong. Construction employment jumped by 28,000 last month, the largest gain since February.

Also weighing on the U.S. currency were comments by Treasury Secretary Steven Mnuchin, who suggested on CNBC that a weaker dollar might have advantages for U.S. trade.

Mnuchin also said that tropical storm Harvey which ravaged Texas could bring forward the deadline by which the nation's debt ceiling needs to be raised.

Inflation and wage levels remain two uncertainties for Fed policy: Economist

The dollar also recovered since it was oversold heading into the employment report, said Alfonso Esparza, senior currency analyst at Oanda in Toronto. The dollar index rallied 0.7 percent on Wednesday in a partial rebound from its plummet late last week and on Monday after European Central Bank President Mario Draghi made no mention of the euro's strength at a gathering of central bankers.

That omission had been seen as a tacit green signal to euro bulls and led the euro to hit a more than 2-1/2-year high on Tuesday of $1.2069.

Traders' expectations for the August nonfarm payrolls data were also excessively high given strong ADP U.S. private payrolls data released earlier this week, said Oanda's Esparza.

"The [Fed] rate hike is still sort of a question mark, but [Friday's jobs data] wasn't that big a miss to take it totally off the table for the rest of the year," he said.

The dollar was last up 0.28 percent against the yen at 110.27 yen after slumping to a session low of 109.57 yen just after the jobs data.

— CNBC's Jeff Cox contributed to this report.