Dollar Cuts Into Weekly Rise After Jobs Data

The U.S. dollar turned down slightly against the euro late Friday, and came off a 29-month high versus the Japanese yen, as U.S. stocks rose and a report showed the U.S. economy continued to add jobs in December.

International traders also bought the dollar after minutes of the Federal Reserve’s most recent meeting, released late Thursday, showed some policy makers were considering an end to asset purchases this year. However, a steady unemployment rate revealed Friday challenged any who think the Fed’s easing may be ending soon.

The ICE dollar index , which measures the greenback’s performance against a basket of six currencies, turned down to 80.440 from 80.834 before the report and 80.447 late Thursday in North American trading — still well above its 80.199 level before the Fed meeting minutes were released.

The euro  traded at $1.3082, compared with $1.3008 before the data and versus $1.3053 Thursday. Earlier, it fell under $1.30 level — something it hadn’t done for a couple weeks.

U.S. equities ended higher, which has tended to correlate with a weaker dollar. The S&P 500 Index  gained 0.5% during the session.

The dollar jumped versus the yen as Japanese markets reopened for the first time in 2013 after a string of holidays. The dollar lately traded at ¥88.13, a level last seen in July 2010 and up from ¥87.26 late Thursday.

The U.S. economy added 155,000 jobs last month, fewer than some economists expected. The unemployment rate stayed at 7.8%, after some revisions to November figures, the Labor Department said.

“Even with decent employment growth no downward progress has been made on the unemployment rate. This will tend to play to views that unemployment rate will take a long time to get to levels that encourage tighter Fed policy,” possibly because more people are re-joining the labor force, said Alan Ruskin, a macro strategist at Deutsche Bank.

”The data will at the margin undermine the latest fears that QE4 will not be extended into next year,” he said. “It plays more to those who look for QE4 extended to year-end rather than mid-2013. To that extent the data is less U.S. dollar friendly.”

The nickname QE4 is shorthand some analyst use to refer to the Fed’s fourth round of quantitative easing.

Federal Open Market Committee meeting minutes released Thursday showed “several” Fed officials thought the central bank would be able to slow or stop purchases well before December 2013, the

“Overall, the minutes suggest that the FOMC might be less dovish than its previous communications and policies had indicated,” said Gary Yau, a strategist at Crédit Agricole.

For the week, the dollar index has gained 1% — its best week since July.

The euro is off 1% for the week.

Japanese yen

Against the yen, the dollar has jumped another 2.5%, adding to big gains at the end of 2012. It’s the strongest weekly gain since November 2011.

The dollar had been gaining most notably against the yen recently as a new political leadership is seen as prodding more monetary easing to weaken the currency.

The dollar’s move against the yen is also closely correlated with U.S. Treasury yields. Rising yields make the debt more attractive to overseas investors (and Japan is one of the biggest for the U.S.), boosting the dollar.

On Friday, after the payrolls report, Treasury yields came off their highest levels seen since last May.

For now, Jane Foley, senior currency strategist at Rabobank, says the dollar/yen rally remains vulnerable to a correction at some point in the first quarter. For now, support remains at the ¥87.35 area, with resistance seen near ¥89, she said.

Against the yen, the euro jumped to ¥115.29, from ¥113.83 Thursday.

“The pressure on the single currency at present is more down to positioning rather than anything fundamental, with break of trendline support at $1.3095 favoring continuation of weaker tone,” wrote strategists at FxPro.

Among other major currency pairs, the Canadian dollar advanced after the country’s over payrolls report showed the Canadian economy added 59,000 jobs in December and the unemployment rate declined. See Statistics Canada jobs report.

The U.S. dollar  turned down 0.1% to buy 98.72 Canadian cents.

The British pound fell to $1.6079 from $1.6103, and the Australian dollar  turned up to buy $1.0483 from $1.0465.

Marketwatch