Early trade in New York: dollar inches up on stronger-than-expected jobs report

The US dollar inched up on Friday following the release of expectation-beating employment data which stoked inflation fears and prompted traders to raise bets the Federal Reserve will hike interest rates a fourth time this year. Domestic job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8 percent, pointing to rapidly tightening labour market conditions. The US Labour Department's report also showed solid wage gains, making a rate hike in June near-certain, and increasing expectations of a fourth hike this year.
Bets by traders in short-term interest-rate futures showed confidence in hikes in June and September, and see about a 36 percent chance of a rate hike in December, up from about 32 percent before the report. The Fed has raised rates once this year so far, in March. Against a basket of six currencies, the dollar rose half a percent to a session high of 94.45. The move, however, was relatively muted compared to the blockbuster jobs numbers.
That's because "the market was fairly pricing the Fed's path coming into the number, which was a shift from the beginning of the week where the market took out some of the rate hikes," said Charles Tomes, senior investment analysts at Manulife Asset Management. The euro edged higher on Friday and looked set to break a six-week losing streak, supported by a drop in Italian bond yields after a revived coalition deal between two anti-establishment parties pulled the country back from snap elections. On Friday, the single currency edged 0.2 percent higher to a session high of $1.1717. On a weekly basis, it is set to climb 0.5 percent, breaking six-week losing streak.