Currencies: Dollar falls Friday, but still manages a weekly gain

NEW YORK (MarketWatch) — The ICE U.S. Dollar Index moved lower Friday as a contraction in hourly wage growth in December caused investors to delay their expectations for when the Federal Reserve will begin raising its benchmark interest rate.

But despite its losses on Friday, the greenback still recorded a gain for the week as investor worries about the outcome of Greece’s general election later this month pushed the euro lower against the dollar for most of the week.

Weak data played a role as well, as a gauge of eurozone consumer-good prices showed they hit a five-year low in December. Meanwhile, the German consumer price index reading for 2014 showed that prices remained flat month over month, lower than economists’ polled by The Wall Street Journal had expected.

Investors also sold euros on the expectation that the European Central Bank will soon implement “full-blown” quantitative easing by beginning purchases of government bonds — possibly at its meeting on Jan. 22.

Naeem Aslam, chief market analyst at AvaTrade, said that the decline in wage growth drained some optimism from the market, as investors reconsidered the odds that the Federal Reserve will begin a regimen of interest-rate increases in 2015.

Analysts tied the dollar’s weakness on Friday to the Labor Department’s nonfarm payrolls report for December. The report showed that more jobs were created than economists had expected, and it revised upward job-growth estimates from October and November.

But wage growth in December was down 0.2%, compared with estimates calling for 0.2% growth, which caused investors to rethink when the Fed would begin raising rates.

Also read: How economists are summing up the jobs report

The dollar index, DXY, -0.43% a measure of the greenback’s strength against a trade-weighted basket of six rival currencies, was down 0.46% to 91.9450.

The dollar USDJPY, -0.97%  was at ¥118.50, compared with ¥119.65 late Thursday in New York. The euro EURUSD, +0.41%  was at $ 1.1839, from $ 1.1788.

The pound GBPUSD, +0.46%  rose slightly against the dollar, moving back above the $ 1.51 level after U.K. manufacturing output recorded strong growth in December.

Dollar Index

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