Dollar shrugs off weak jobs report as manufacturing pmi hits 6-year high

The dollar remained on track post a weekly gain on Friday – The dollar steadied against a basket of major currencies on Friday, after better-than-expected manufacturing data offset a nonfarm payrolls report that undershot expectations fuelling uncertainty as to whether the Federal Reserve will hike rates late this year.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.14% to 92.72.

The dollar recovered from a dip to session lows of 92.06, following data showing weakness in the US labor market. Losses in the greenback, however, were short lived as investors cheered bullish manufacturing data.

The Institute for Supply Management said its manufacturing index in August climbed to 58.8% from 56.3% in July. That is the highest reading since April 2011.

The U.S. economy created 156,000 jobs in August, missing consensus estimates for the creation of 180,000 jobs.

The jobless rate unexpectedly rose in August to 4.4% while average hourly earnings fell short of expectations, slowing to 0.1% from 0.3% in the prior month.

The Federal Reserve closely monitors wage growth for evidence of continuing strength in the labor market and upward pressure on inflation. The retracement in the dollar, however, suggests that investors are not overly concerned that the weak nonfarm payrolls report could deter the Fed from raising rates for a third time later this year.

Some analysts said the weak jobs report was “not weak enough” to change the Fed’s plan to hike rates at least once more this year.

“The headline number was weaker than the consensus, but not weak enough to change the Fed’s stance on rates. Also, August is notorious for statisticians to get it right and numbers are usually revised higher afterward. Investors take it with a grain of salt,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange.

The rebound in the dollar pegged back the euro to session lows while sterling pared some of its recent losses against the greenback to trade higher.

EUR/USD fell 0.42% to $1.1859 while GBP/USD rose 0.20 to $1.2954.

USD/JPY rose 0.28% to Y110.28 while USD/CAD fell 0.83% to C$1.2382.

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