NEW YORK (Reuters) - The U.S. dollar was steady against a basket of currencies on Friday, after briefly dropping on disappointing U.S. employment data for April.
The U.S. economy added fewer jobs than expected and the unemployment rate dropped to near a 17-1/2-year low of 3.9 percent as some jobless Americans left the labour force.
Average hourly earnings rose 4 cents, or 0.1 percent, last month after gaining 0.2 percent in March. That left the annual increase in average hourly earnings at 2.6 percent.
“The U.S. report seems pretty soft in tone on a headline basis and in the details as well,” said Erik Nelson, a currency strategist at Wells Fargo in New York. “It’s a little surprising to see the dollar remain so resilient.”
Against a basket of its peers, the dollar was up 0.13 percent on the day at 92.535 , little changed from where it traded before the data. It initially dropped to 92.354 on the news.
The dollar index reached a 2018 high of 92.834 on Wednesday as investors bet that the Federal Reserve will continue raising rates while other central banks including the European Central Bank (ECB) will act more slowly.
“The story in the last few days has been the disappointment over the ECB and the UK to start raising interest rates in the wake of the Fed and unless we see data picking up meaningfully, the dollar will outperform in the coming weeks,” said Gavin Friend, senior markets strategist at NAB in London.
The sharp rise in the dollar in recent weeks - it broke above a 200-day moving average this week for the first time in a year - took hedge funds and other investors by surprise. They had built up record short bets on the dollar and were forced to cover some of those positions, lifting the greenback even more.
Wells Fargo’s Nelson sees further upside in the greenback as likely limited, however, saying that pessimism over other economies may be overdone.
“Everyone’s gotten really pessimistic about the euro zone economies and I think that’s maybe reaching a breaking point,” Nelson said. “I think the economies are strong enough in those countries to keep central banks on track to keep normalizing monetary policy.”
Reporting by Karen Brettell; Additional reporting by Saikat Chatterjee in London; Editing by Steve Orlofsky
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