Investing.com - The dollar rebounded against a basket of the other major currencies on Friday after the latest U.S. jobs report showed that wage growth accelerated in January, indicating that the Federal Reserve could still raise interest rates this year.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.48% at 96.98 late Friday, off three-and-a-half month lows of 96.04 struck earlier in the session.
The index still ended the week down 2.61%, the largest weekly percentage decline since October 2011.
The U.S. Department of Labor reported that average hourly earnings rose 0.5% last month and were up 2.5% on a year-over-year basis.
The economy created 151,000 jobs last month, the lowest number since September and less than the 190,000 forecast by economists’.
Despite the slowdown in jobs growth the unemployment rate fell to 4.9%, the lowest level since February 2008.
The pick-up in wage growth bolstered the outlook for inflation and increased the likelihood that the Fed could raise interest rates this year.
Higher interest rates would make the dollar more attractive to yield-seeking investors.
EUR/USD was down 0.47% to 1.1154 in late trade, after briefly touching three-and-a-half month highs of 1.1246 immediately after the report.
The single currency still ended the week with gains of 3.05%, the largest weekly increase since late April.
The dollar also regained ground against the pound, with GBP/USD down 0.58% at 1.4502 late Friday.
The dollar edged higher against the yen, with USD/JPY up 0.09% to 116.88 in late trade, off lows of 116.27.
The greenback’s gains were held in check by the slowdown in job creation.
The dollar had fallen sharply in the previous two sessions as weak U.S. economic reports and dovish comments by a Fed official raised doubts over how much the central bank could hike rates in 2016.
In the week ahead, investors will be looking to Wednesday’s testimony by Fed Chair Janet Yellen and Friday’s data on U.S. retail sales for further indications on the strength of the world’s largest economy.
Friday’s preliminary report on euro zone fourth quarter growth will also be closely watched amid heightened expectations for more easing by the European Central Bank in the coming months.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, February 8
Markets in China will be closed for the Lunar New Year holiday.
In the euro zone, Germany is to release data on industrial production.
Canada is to publish a report on building permits.
Tuesday, February 9
Markets in China will remain closed for the Lunar New Year holiday.
Australia is to release private sector data on business confidence.
The U.S. is to produce a report on the trade balance.
Wednesday, February 10
Australia is to publish a report on consumer sentiment.
Markets in China will be closed for the Lunar New Year holiday.
The U.K. is to produce data on industrial production.
Fed Chair Janet Yellen is to testify on the semiannual monetary policy report before the House Financial Services Committee in Washington.
Thursday, February 11
Markets in both Japan and China will be closed for holidays.
Canada is to release data on new house price inflation.
The U.S. is to publish the weekly report on initial jobless claims.
Fed Chair Janet Yellen is to testify on monetary policy before the Senate Banking Committee in Washington.
Friday, February 12
Reserve Bank of Australia Governor Glenn Stevens is to speak in Sydney.
Markets in China will be closed for the Lunar New Year holiday.
The euro zone is to publish preliminary data on fourth quarter economic growth.
The U.S. is to round up the week with data on retail sales and consumer sentiment.