The U.S. dollar inched lower against the yen and euro Friday, reversing gains rung up earlier in the session, as investors began to second guess a report on December jobs growth released earlier in the session.
Its declines cemented the dollar’s worst weekly performance against the yen since August 2013 — and its worst weekly performance against the euro since early December of last year — as Chinese stocks and the yuan dropped sharply, with global ramifications. The dollar was down 2.6% against the yen on the week, while the euro rose 0.6% against the dollar.
Earlier Friday, the dollar traded higher as Chinese markets stabilized and then extended its gains against the euro and yen after the jobs report showed the U.S. economy added 292,000 nonfarm jobs in December. But as the session wore on, traders started to look past the strong headline number, and strong upward revisions to readings from October and November, and instead focused on the fact that there was no wage growth, said Matt Weller, senior technical analyst at Forex.com.
“In a lot of ways we saw a typical post-NFP reaction,” Weller said. “But then, as traders dug beneath the surface, the full impact of the weaker-than-expected wage growth came to light.”
Fed policy makers view wage growth as an important driver of inflation, and investors are worried that the Fed will delay its next hike — which many expect to come in March — if it remains stagnant.
The dollar USDJPY, -0.34% traded at ¥117.52 late Friday in New York, compared with ¥117.74 late Thursday in New York.
The euro EURUSD, -0.0640% traded at $1.0917 Friday, compared with $1.0917 Thursday. The pound GBPUSD, -0.6773% traded at $1.4523, compared with $1.4647.
Despite the dollar’s declines against the euro and yen, the ICE U.S. Dollar index DXY, +0.08% which measures its strength against a basket of six currencies, rose 0.2% to 98.4530.