(Updates prices, adds comment)
* U.S. non-farm payrolls show big upside surprise, but wages
* Fed still on track to raise rates 3 times this year
* U.S. non-manufacturing index slightly lower than forecast
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 3 The dollar fell on Friday in
choppy trading after the U.S. employment report showed a
smaller-than-expected rise in wages last month despite strong
jobs gains, likely prompting the Federal Reserve to be less
aggressive in raising interest rates this year.
The greenback has struggled amid concerns about the Trump
administration's preference for a weak dollar. It posted its
worst January in percentage terms in 30 years.
So far this week, the trend continues to be lower. The
dollar was down 2.3 percent against the yen this week, on track
for its worst weekly performance since late July.
Further compounding the dollar's anemic trend this year was
Friday's report showing that January non-farm payrolls rose by
227,000 jobs, the largest gain in four months. But the
unemployment rate rose one-tenth of a percentage point to 4.8
percent and wages increased modestly, suggesting there was still
some slack in the labor market that would keep inflation in
As a result, Fed fund futures priced in a slim chance of a
rate hike in March on Friday after the jobs data, according to
the CME Group's FedWatch. Rate futures have instead priced in a
June hike, with a probability of more than 60 percent.
"Tempered Fed expectations are ultimately the biggest market
takeaway we get from the report," said Marvin Loh, senior global
markets strategist at BNY Mellon in Boston.
"This is not to say that we read this report as indicating a
weaker employment situation, just the existence of more slack
than the headline unemployment rate would point at. And the less
aggressive rate hike profile feeds into a weaker dollar," he
Average hourly earnings rose just 0.1 percent, lower than
the market's forecasts for a 0.3 percent increase. There was
also a downward revision to the December wage growth.
In midday trading, the dollar index, which tracks the
greenback versus six top currencies, slipped 0.1 percent to
Against the yen, the dollar was down 0.3 percent at 112.46
yen. The euro, meanwhile, was up 0.2 percent against the
dollar at $1.0784.
January's U.S. non-manufacturing index also showed a reading
of 56.5, slightly lower than the market's 57.0 forecast.
However the number remained higher than the 54.9 average for
the whole of 2016, according to High Frequency Economics.
"A little lower then expected, but still fairly strong, said
Jim O'Sullivan, chief U.S. economist at High Frequency
Economics. "The data suggests good upward momentum."
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Alden
Bentley and Chris Reese)