Currencies: Dollar index soars Friday, but ends week lower

NEW YORK (MarketWatch) — The ICE U.S. Dollar Index ended the week lower Friday as the gains that followed January payrolls data failed to offset the euro’s strength from earlier in the week.

The euro rallied this week as Greece’s newly elected Finance Minister Yanis Varoufakis dropped his demands for the ECB to write off part of Greece’s €315 billion in foreign debt.

But the buck surged against the euro, yen and pound Friday after a stronger-than-expected jobs report.

Analysts now expect the Federal Reserve to raise its benchmark interest rate, which would be the first increase in eight years, in mid-2015.

Last month, a drop in hourly wage growth caused traders to second-guess expectations of a midyear hike, said Matthew Weller, senior technical analyst at Forex.com. But this month’s data was much stronger than even the most optimistic forecasts.

Hourly wages increased by 0.5% in January, the strongest growth since November 2008.

“There is no other way to describe it: this was a perfect jobs report, across the board. If these gains are maintained moving forward, a June rate hike from the Federal Reserve is absolutely on the table and may even be the preferred scenario if inflation shows signs of ticking higher,” Weller wrote Friday in a research note.

The dollar USDJPY, +1.37% soared to ¥119.17 after the report, its highest level against the Japanese currency in a month. It traded at ¥117.54 late Thursday in New York.

The euro traded EURUSD, -1.41%  at $ 1.1315 after surrendering all of its massive gains from Thursday’s session. The shared currency traded at $ 1.1467 Thursday evening.

U.S. adds 257,000 jobs as wage gains appear

Meanwhile, the pound GBPUSD, -0.55%  traded at $ 1.5248, compared with $ 1.5322 Thursday.

Charles Plosser, the president of the Philadelphia Fed, said Friday that it would be difficult to justify the Fed not raising rates in the near future.

The dollar index DXY, +1.13%  , a measure of the dollar’s strength against a trade-weighted basket of six rival currencies, was up 1% to 94.6980, its highest level in a week.