The dollar falls from a 20-year high and Latin American currencies rise after US employment report

The dollar retreated from a 20-year high on Friday after a report that the pace of US hiring rose slightly more than expected in August, giving the Federal Reserve some wiggle room on how aggressively it that will raise interest rates this month.

Meanwhile, most currencies and stock markets in Latin America showed gains due to a lower aversion to risk assets.

Nonfarm payrolls increased by 315,000 jobs in August, beating the 300,000 consensus forecast of economists polled by Reuters and marking the 20th straight month of job growth.

The dollar index, which compares the greenback to a basket of six major currencies, fell after the jobs report, though it later erased some of its losses. The greenback was down 0.319% at $109.24 =USD, but was still on track for its third straight weekly gain.

Fed funds futures were unchanged after the jobs report and priced at a 75% chance the Fed will hike rates by 75 basis points this month, according to Refinitiv data.

The dollar renewed a 20-year high on Thursday at 109.99 and has risen sharply since Fed Chairman Jerome Powell said last Friday that rates will have to be high “for some time” to combat inflation.

The euro partially recovered from the previous day’s losses against the US currency and returned above parity, gaining 0.62% to $1.0006.

The European Central Bank is due to meet next week and money markets are betting on an unprecedented 75 basis point increase in the interest rate.

Latin American currencies rise

Most currencies and stock markets in Latin America showed gains on Friday due to a lower aversion to risk assets, amid a positive global outlook after US employment figures that caused the dollar to decline.

The gains were led by the Chilean peso, which climbed 1.37%, to 885.50/885.80 units per dollar, in a volatile session ahead of the plebiscite that will take place next Sunday.

Chileans will have to go to the polls on Sunday to decide whether to approve or reject a new Magna Carta, through an unprecedented plebiscite that has polarized the political environment and has put a high share of uncertainty in the markets.

The Brazilian real appreciated 1.17% to 5.1798 units per dollar.

The Mexican peso was trading at 19.9330 per dollar, gaining 1.17% against Thursday’s Reuters benchmark, as investors reacted positively to the US jobs report.

Analysts at Monex said in a note sent to clients that the Mexican currency could be tilted to depreciate later in the day due to the strong US non-farm payrolls report, which could still strengthen the case for more rate hikes. aggressive interest rates by the Federal Reserve.

The Colombian peso recovered 0.85% to 4,450 units per dollar, after three days of losses.

The Peruvian currency, the sol, gained 0.18%, at 3.854/3.862 units per dollar.

The markets of Argentina remained closed on Friday due to the frustrated attack suffered by the vice president, Cristina Fernández. The central bank of Argentina (BCRA) ordered a banking and exchange holiday this Friday in tune with the decision of the national government in repudiation of the attack suffered the previous night by Fernández.

With information from Reuters

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