FOREX-Dollar rises as US jobless claims unexpectedly fall

By Karen Brettell

NEW YORK, Jan 15 (Reuters) - The dollar rose on Thursday after data showed that the number of Americans filing new applications for unemployment benefits unexpectedly fell last week, further boosting expectations that the Federal Reserve will keep rates on hold for the next several months.

Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 198,000 for the week ended January 10, the Labor Department said on Thursday. Economists polled by Reuters had forecast 215,000 claims for the latest week.

“We are at the lower end of the range,” said Lou Brien, strategist at DRW Trading, adding that market participants are likely “shifting positions a little bit and pushing the dollar higher as a result."

Brien notes, however, that the U.S. data overstates jobs growth due to flaws in the "birth-death model" the data is based on and other factors. Annual revisions to payrolls data are likely to reveal a much weaker labor market when they are released, though those reports come with a significant lag, he said.

Fed funds futures have pushed back expectations for the next rate cut to June due to the improving labor data and as Fed policymakers continue to express concern about still sticky inflation.

Friday’s jobs report for December showed that the unemployment rate fell more than economists had expected, to 4.4%.

Chicago Fed President Austan Goolsbee said Thursday that amid ample evidence of stability in the job market the central bank should be focused on getting inflation down.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro,
rose 0.28% to 99.35, with the euro EUR= down 0.29% at $1.1608.

Risk sentiment was also boosted after U.S. President Donald Trump said he had been told that killings in Iran’s crackdown on protests were easing and that he believed there was no current plan for large-scale executions, adopting a wait-and-see posture after earlier threatening intervention.

The Japanese yen, meanwhile, weakened on concerns that Japanese Prime Minister Sanae Takaichi will have more leeway to introduce more fiscally expansionist policies.

Takaichi plans to dissolve parliament next week and call a snap parliamentary election, the secretary general of her party said on Wednesday, as she seeks public backing for her spending plans.

The Japanese yen JPY= weakened 0.05% against the greenback to 158.54 per dollar.

It held below an 18-month low of 159.45 reached on Wednesday, however, as traders watch for a possible intervention to shore up the currency.

Japanese authorities said on Wednesday they would not rule out any options to counter foreign exchange volatility.

In cryptocurrencies, bitcoin BTC= fell 1.90% to $95,655.