Dollar drops as jobs data point to bumpy recovery

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NEW YORK (AP) — The dollar tumbled Friday as the government’s report on employment showed big job losses in December, signaling a bumpy recovery from the recession.

The 16-nation euro jumped to $1.4350 in morning trading in New York. Just prior to the release of the jobs report, it was fetching $1.4280. On Thursday afternoon, the euro was worth $1.4325.

Meanwhile, the British pound rose to $1.6016 from $1.5940 late Thursday, and the dollar slid to 92.86 Japanese yen from 93.26 yen.

On Friday, the government said employers cut a bigger-than-expected 85,000 jobs in December. Economists had expected only 8,000 job losses. The unemployment rate held steady at 10 percent last month as the work force lost 661,000 people. Those discouraged workers who did not actively seek employment are not counted as members of the labor force by the government.

Brown Brothers Harriman analyst Marc Chandler said the disappointing jobs data was causing investors to cut their bets on the Federal Reserve hiking interest rates in the third quarter.

Rising investor expectations of a rate hike sooner than later had given a boost to the dollar in December. Raising interest rates from the current rock-bottom range near zero would very probably cause the dollar’s value to rise as investors transferred funds to U.S. assets, which would generate higher returns with higher interest rates.

The Fed has said that continuing high unemployment and slack in the economy, alongside subdued inflation, would allow it to leave interest rates very low for an “extended period.”