The dollar held on to its highest level in nearly a month on Friday as US economic data highlighted a still-tight labor market that could keep the Federal Reserve on its aggressive rate hike path.
The number of Americans filing new claims for unemployment benefits fell to a three-month low last week, while layoffs plunged 43% in December, data showed on Thursday.
A separate report also showed that private employment increased by 235,000 jobs last month, well above expectations for an increase of 150,000.
Against a basket of currencies, the US dollar index rose 0.2% to 105.3, having touched a four-week high of 105.36.
The index was on track for weekly gains of more than 1.8%, its biggest since September.
“Strong labor market data means the Fed may hike interest rates,” said Giles Coghlan, chief market analyst at HYCM.
“That’s why we saw a reaction to the positive labor data yesterday in the dollar,” Coghlan said.
Most major currencies were trading with losses on Friday after a rising dollar pushed them to multi-week lows in the previous session.
The euro declined 0.8% in the previous session and touched a three-week low of $1.05075.
Against the Japanese yen, the dollar climbed 0.7% to 134.45 yen, its highest level in a week.
Markets now turn their attention to a closely watched nonfarm payrolls report due later on Friday, with economists polled by Reuters forecasting the US economy to have added 200,000 jobs in December.
“Today, it’s the same narrative as yesterday. If the labor market is doing well, we are likely to see more dollar strength,” said HYCM’s Coghlan, adding that a payrolls number toward the lower end of expectations could see the dollar Is. Weaken and comfort the Fed that their hiking cycle is working.
December’s flash inflation data for the euro area will also be released on Friday, where an annual inflation rate of 9.7% is expected, down from 10.1% in November.
Data from Germany, France, Italy and Spain already showed a slowdown in inflation last month, suggesting euro area consumer prices should have eased in December.
“Estimating energy prices led to a significant decline in headline CPI inflation in December,” Han-Ju Ho, senior economist for commercial banking at Lloyds Bank, said in a note.
“However, this will likely provide limited comfort for ECB policymakers, especially as core inflation excluding food and energy is forecast to continue to accelerate.”
Elsewhere, sterling was last 0.2% lower at $1.1883, having fallen to a six-week low of $1.1873 on Thursday.
The Australian dollar was little changed at 0.6753 after falling 1.3% in the previous session and reversing gains earlier this week after China eased its restrictions on coal imports from Australia.
The kiwi was flat at $0.6220 after a 1% drop on Thursday, and was on track for a weekly loss of close to 2%, its worst since September.
The text of this story is published from a wire agency feed without any modification.
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