Dollar steady after jobs miss as taper hopes remain intact

he U.S. dollar was largely unmoved by a disappointing U.S. employment report on Friday, as traders bet that the lacklustre numbers may not sway the Federal reserve from starting a tapering of its asset purchases as early as November.

The Labor Department said in its employment report on Friday that nonfarm payrolls increased by 194,000 jobs last month. Economists polled by Reuters had forecast payrolls increasing by 500,000 jobs.

The fact that the gain in jobs was modest could temper expectations for a swift acceleration in economic growth following an apparent sharp slowdown in the third quarter, but is unlikely to stop the Federal Reserve from starting the process of reducing its monthly bond purchases as soon as November, analysts said.

September's employment report is the last one available before the Federal Reserve's Nov. 2-3 policy meeting.

"(It's a) miss on the headline number for sure, but the underlying details are not as really nefarious as the top-line miss would suggest and so, ultimately, it's still consistent with the Fed delivering taper next month," said said Mazen Issa, senior FX strategist, at TD Securities in New York.

The dollar index, which tracks the greenback against six major currencies, was down 0.1% at 94.103, not far from the one-year high of 94.504 touched last week.

"Price action in the dollar suggests that participants are seeing the silver lining, keeping expectations for a taper decision anchored around November or December, with the first rate hikes landing in autumn 2022," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

TD's Issa said the disappointing jobs number could lead to a dip in the dollar but any such weakness was likely to be fleeting.

"I think the market is going to need a lot more convincing that just one jobs report that's on the softer side is going to price the Fed out beyond late 2022 and into 2023," Issa said.

In the week following jobs data the dollar tends to reverse most of the gain or loss that has occurred from the day of the NFP release, FX strategists said in a BofA Global Research report on Thursday.

The weaker dollar helped sterling steady on Friday, putting it on track to close out the week up 0.6%, its weekly performance in 5 weeks, as interest rate hike expectations offset worries about a fuel crisis and labour shortages.

In the digital currency space, bitcoin, the world's biggest cryptocurrency by market value, was 1.1% higher at $54,398.28, just shy of the 5-month high of $56,168 touched earlier in the session. Bitcoin is up about 13% for the week, its second straight weekly gain.

 

(Reporting by Saqib Iqbal Ahmed; Additional reporting by John McCrank; Editing by Kevin Liffey)