US Dollar Index Treks Higher Following NFP Report

USD currency

The US dollar advanced briskly on Friday, as non-farm payrolls rose more than forecast in May, easing concerns about a broader economic slowdown in the second quarter.

The US dollar index (DXY), a trade-weighted average of the dollar against a basket of currencies, rose 0.9% to 96.28.

Non-farm payrolls rose by 280,000 in May, following a revised gain of 221,000 in April, the Department of Labor reported on Friday. The tally was much bigger than forecasts calling for 225,000. With the May increase, non-farm payroll growth has averaged 209,000 over the past three months.

Job gains were broad-based last month, with professional and business services, health care, retail trade and construction all posting gains.

The unemployment rate edged up slightly to 5.5% from 5.4% as more Americans returned to the workforce. The average hourly earnings rate increased 0.3% compared to April and 2.3% year-on-year, official data showed.

The dollar strengthened across the board on Friday. The GBP/USD fell 0.8% to 1.5240 and was trading near daily lows in the early New York session.

The greenback rallied sharply against a resurgent euro, as the common currency continued to fret under the weight of Greek bailout talks. The EUR/USD fell 1.1% or 120 pips to 1.1104. The pair tested the 1.14 handle on Thursday following four consecutive daily advances.
The USD/JPY continued to set multiyear highs at the end of the week, as the USD/JPY advanced 0.9% to 125.59. The Japanese yen is expected to weaken further throughout the year as the Bank of Japan considers additional stimulus measures to boost inflation and economic growth.

Friday’s report is unlikely to compel the United States Federal Reserve to begin lifting interest rates at this month’s Federal Open Market Committee policy meetings. Officials have already looked past June as a likely date for rate adjustment, although have acknowledged that rates could begin to increase later this year.

The June rate statement, which will be released in two weeks’ time, will also include a revised summary of economic projections covering GDP, unemployment and inflation. The US economy contracted 0.7% annually in the first quarter, revised estimates showed last month.