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Dollar
Business
 on August 6, 2017

Dollar index surges on US jobs data, Cohn comments

Article by  

NEW YORK – The United States dollar was set for its biggest one-day gain against a basket of major currencies so far this year after a strong US July payrolls report and comments from National Economic Council director Gary Cohn about lowering the US corporate tax rate.

The dollar index, which measures the greenback against six major rivals, jumped about 1 per cent to a one-week high of 93.774 .DXY after the Labour Department said nonfarm payrolls increased by 209 000 jobs last month and Cohn’s comments. It was last up 0.7 per cent at 93.529.

Cohn told Bloomberg TV on Friday that the 35 per cent US corporate tax rate should be more in line with the 24 per cent average rate among other countries in the Organisation for Economic Cooperation and Development.

The jobs figure beat expectations of economists polled by Reuters for a gain of 183 000, while average hourly earnings increased 0.3 per cent to match expectations after rising 0.2 per cent in June.

Analysts said traders who had bet against or “shorted” the dollar – a popular bet as the dollar index posted its biggest monthly drop since March 2016 last month – were being forced to repurchase the currency after the jobs data and Cohn’s remarks.

“The jobs number was solid,” said Alvise Marino, FX strategist at Credit Suisse in New York. He also said Cohn’s comments revived traders’ focus on potential tax reform. 

The dollar index’s gains put it on track for its biggest one-day percentage increase since December 15. The euro fell more than one per cent against the dollar to a four-day low of $1.1729 EUR after touching a more than 2-1/2-year high of $1.1909 on Wednesday.

While the dollar index was set to post its first weekly percentage gain in four weeks, the Euro was still set to post its fourth straight weekly percentage increase against the greenback.

Against the yen, the dollar gained as much as 0.9 per cent to a one-week high of 111.04 yen JPY, rising off recent seven-week lows. The dollar touched 0.9763 franc CHF, its highest against the Swiss currency in more than six weeks.

The dollar has suffered in recent months, largely on increased doubts that the Federal Reserve would raise interest rates again this year and obstacles to US President Donald Trump’s agenda, which is seen by investors as pro-growth. 

The outlook for a December rate hike remained uncertain, with federal funds futures last implying traders saw a roughly 50 per cent chance of a December increase on Friday, according to CME Group’s FedWatch tool.

“This is just a pause in the weak dollar trend,” said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York. (Reuters)

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